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Wednesday, April 6, 2016

Loans to be cheaper as RBI cuts key rate 0.25 perc ent

Home and car loans, as well as personal loans, will soon become cheaper with the quarter per cent (25 basis points) cut in the repo rate (rate at which banks borrow from the RBI) and several other measures to increase liquidity in the banking system that were announced by RBI governor Raghuram Rajan in his credit policy statement Tuesday.

This cut has brought the short-term lending rate down to 6.5 per cent, the lowest in five years. Dr Rajan said: “You will see a significant more transmission of cuts in the next few months.”

The policy objective was to hike liquidity in the banking system to enable banks to transmit the 125 bps (1.25 per cent) cuts made so far, he said at a press briefing. It will be the RBI’s endeavour to ensure that the banks pass on the rate cuts to their customers.

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