{"id":1555,"date":"2019-12-04T10:30:25","date_gmt":"2019-12-04T10:30:25","guid":{"rendered":"https:\/\/jobbinghood.com\/finance\/2019\/12\/04\/if-rbi-cuts-rate-by-25-basis-points-repo-to-be-lowest-in-almost-10-years\/"},"modified":"2019-12-04T10:30:25","modified_gmt":"2019-12-04T10:30:25","slug":"if-rbi-cuts-rate-by-25-basis-points-repo-to-be-lowest-in-almost-10-years","status":"publish","type":"post","link":"https:\/\/jobbinghood.com\/magazine\/2019\/12\/04\/if-rbi-cuts-rate-by-25-basis-points-repo-to-be-lowest-in-almost-10-years\/","title":{"rendered":"If RBI cuts rate by 25 basis points, repo to be lowest in almost 10 years"},"content":{"rendered":"<p> [ad_1]<br \/>\n<\/p>\n<div>\n<div class=\"article-image\">\n<figure><img fetchpriority=\"high\" decoding=\"async\" class=\"lazy lazy-hidden size-full wp-image-1783652\" src=\"http:\/\/www.financialexpress.com\/wp-content\/plugins\/a3-lazy-load\/assets\/images\/lazy_placeholder.gif\" data-lazy-type=\"image\" data-src=\"https:\/\/images.financialexpress.com\/2019\/12\/cats-242.jpg\" alt=\"\" width=\"660\" height=\"440\" srcset=\"\" data-srcset=\"https:\/\/images.financialexpress.com\/2019\/12\/cats-242.jpg 660w, https:\/\/images.financialexpress.com\/2019\/12\/cats-242-300x200.jpg 300w, https:\/\/images.financialexpress.com\/2019\/12\/cats-242-620x413.jpg 620w, https:\/\/images.financialexpress.com\/2019\/12\/cats-242-401x267.jpg 401w\" sizes=\"(max-width: 660px) 100vw, 660px\"\/><noscript><img decoding=\"async\" class=\"size-full wp-image-1783652\" src=\"https:\/\/images.financialexpress.com\/2019\/12\/cats-242.jpg\" alt=\"\" width=\"660\" height=\"440\" srcset=\"https:\/\/images.financialexpress.com\/2019\/12\/cats-242.jpg 660w, https:\/\/images.financialexpress.com\/2019\/12\/cats-242-300x200.jpg 300w, https:\/\/images.financialexpress.com\/2019\/12\/cats-242-620x413.jpg 620w, https:\/\/images.financialexpress.com\/2019\/12\/cats-242-401x267.jpg 401w\" sizes=\"(max-width: 660px) 100vw, 660px\"\/><\/noscript><span class=\"article-caption\">However, despite the rate cut of this magnitude, the transmission of rates has been quite limited and has remained a cause of concern.<\/span><\/figure>\n<\/div>\n<p>If the Reserve Bank of India (<a target=\"_blank\" href=\"http:\/\/www.financialexpress.com\/tag\/rbi\/\" rel=\"noopener noreferrer\">RBI<\/a>) decides to trim the rate by a further 25 basis points on December 5 to 4.9% \u2014<br \/>a move that is widely expected \u2014 it would touch the lowest levels since March 2010.<\/p>\n<p>The repo rate is the rate at which RBI lends to banks. Currently, it stands at 5.15% after the central bank reduced the rate by 25 basis points in the October monetary policy.<\/p>\n<p><a target=\"_blank\" href=\"http:\/\/www.financialexpress.com\/market\/stock-market\/care-ratings-ltd-stock-price\/\" rel=\"noopener noreferrer\">CARE Ratings<\/a> said in a report that in case the monetary policy committee (MPC) cuts the policy rates by 25 bps in the current policy, it would hold policy rates in the February policy and track the efficacy of interest rate transmission and its impact on economic growth. \u201cRBI will maintain its accommodative stance keeping the persistent economic slowdown in the background,\u201d it said.<\/p>\n<p>Independent market expert Gopikrishnan MS points out there was a time earlier this year when growth was slowing down and inflation was stable around 3%, that presented conducive conditions for cutting rates. \u201cHowever, inflation is currently at a level where it cannot be taken for granted despite the fact that core inflation and growth has fallen significantly. Moreover, falling revenue collections imply fiscal deficit concerns are going to stay. So, there is very little RBI can do in terms of rate cut and I believe they may cut the repo by another 15-25 bps in the upcoming monetary policy. I think this is the bottom,\u201d he said.<\/p>\n<p>RBI has so far reduced the repo by 135 basis points this year. However, despite the rate cut of this magnitude, the transmission of rates has been quite limited and has remained a cause of concern. The central bank had also indicated in its October policy statement that monetary transmission has remained staggered and incomplete.<\/p>\n<p>\u201cAgainst the cumulative policy repo rate reduction of 110 bps during February-August 2019, the weighted average lending rate (WALR) on fresh rupee loans of commercial banks declined by 29 bps. However, the WALR on outstanding rupee loans increased by 7 bps during the same period,\u201d RBI said.<\/p>\n<p>Gopikrishnan further points out that liquidity is very high but banks are not lending enough as they are still risk averse. \u201cThe slow transmission also indicates banks are trying to preserve their margins. In such a scenario, another rate cut may not lead to any significant positive outcomes,\u201d he said.<\/p>\n<p>Lakshmi Iyer, chief investment officer (debt) and head products at Kotak <a target=\"_blank\" href=\"http:\/\/www.financialexpress.com\/auto\/new-cars\/mahindra\/\" rel=\"noopener noreferrer\">Mahindra<\/a> AMC, says the MPC meeting this time is set against an interesting backdrop \u2014rising CPI data and a falling GDP growth.<\/p>\n<p>\u201cSuper-impose easing interest rates across the globe, further aggravates the situation. However, the high real rates in India suggest a case for further easing given that CPI rise is largely food prices driven. This tug of war, in our view, may pave way for an additional rate cut in the upcoming policy,\u201d she said.<\/p>\n<p><img decoding=\"async\" class=\"lazy lazy-hidden alignnone size-full wp-image-1783655\" src=\"http:\/\/www.financialexpress.com\/wp-content\/plugins\/a3-lazy-load\/assets\/images\/lazy_placeholder.gif\" data-lazy-type=\"image\" data-src=\"https:\/\/images.financialexpress.com\/2019\/12\/cats-243.jpg\" alt=\"\" width=\"288\" height=\"160\"\/><\/p>\n<p><noscript><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-1783655\" src=\"https:\/\/images.financialexpress.com\/2019\/12\/cats-243.jpg\" alt=\"\" width=\"288\" height=\"160\"\/><\/noscript><\/p>\n<div class=\"common-bottom-text\">\n<p>Get live <a href=\"https:\/\/www.financialexpress.com\/market\/stock-market\/\" target=\"_blank\" rel=\"noopener noreferrer\">Stock Prices<\/a> from BSE and NSE and latest NAV, portfolio of <a href=\"https:\/\/www.financialexpress.com\/mutual-funds-india\/\" target=\"_blank\" rel=\"noopener noreferrer\">Mutual Funds<\/a>, calculate your tax by <a href=\"https:\/\/www.financialexpress.com\/income-tax-calculator\/\" target=\"_blank\" rel=\"noopener noreferrer\">Income Tax Calculator<\/a>, know market\u2019s <a href=\"https:\/\/www.financialexpress.com\/market\/stock-market\/nse-top-gainers\/\" target=\"_blank\" rel=\"noopener noreferrer\">Top Gainers<\/a>, <a href=\"http:\/\/www.financialexpress.com\/market\/stock-market\/nse-top-losers\/\" target=\"_blank\" rel=\"noopener noreferrer\">Top Losers<\/a> &amp; <a href=\"https:\/\/www.financialexpress.com\/mutual-funds-india\/equity-funds\/\" target=\"_blank\" rel=\"noopener noreferrer\">Best Equity Funds<\/a>. Like us on <a href=\" https:\/\/www.facebook.com\/thefinancialexpress\" target=\"_blank\" rel=\"noopener noreferrer\">Facebook<\/a> and follow us on <a href=\" https:\/\/twitter.com\/FinancialXpress\" target=\"_blank\" rel=\"noopener noreferrer\">Twitter<\/a>.<\/p>\n<\/div>\n<\/div>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><br \/>\n<br \/>[ad_2]<br \/><\/p>\n","protected":false},"excerpt":{"rendered":"<p>[ad_1] However, despite the rate cut of this magnitude, the transmission of rates has been quite limited and has remained a cause of concern. If the Reserve Bank of India (RBI) decides to trim the rate by a further 25 basis points on December 5 to 4.9% \u2014a move that is widely expected \u2014 it [&hellip;]<\/p>\n","protected":false},"author":348,"featured_media":1556,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"class_list":["post-1555","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-personal-finance"],"_links":{"self":[{"href":"https:\/\/jobbinghood.com\/magazine\/wp-json\/wp\/v2\/posts\/1555","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jobbinghood.com\/magazine\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jobbinghood.com\/magazine\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jobbinghood.com\/magazine\/wp-json\/wp\/v2\/users\/348"}],"replies":[{"embeddable":true,"href":"https:\/\/jobbinghood.com\/magazine\/wp-json\/wp\/v2\/comments?post=1555"}],"version-history":[{"count":0,"href":"https:\/\/jobbinghood.com\/magazine\/wp-json\/wp\/v2\/posts\/1555\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/jobbinghood.com\/magazine\/wp-json\/wp\/v2\/media\/1556"}],"wp:attachment":[{"href":"https:\/\/jobbinghood.com\/magazine\/wp-json\/wp\/v2\/media?parent=1555"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jobbinghood.com\/magazine\/wp-json\/wp\/v2\/categories?post=1555"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jobbinghood.com\/magazine\/wp-json\/wp\/v2\/tags?post=1555"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}