RBI, yesterday, cut its policy rate by 0.25 per cent, which will make auto loans a little cheaper. Though it is the first reduction in 20 months, RBI has promised to cut it further if the economy continues to do well. The last repo rate cut had happened on May 3, 2013, when it was reduced from 7.5 per cent to 7.25 per cent. After the rate cut, the reverse repo rate also moved down by 25 basis points to 6.75 per cent.
Right after the announcement, state-owned Union Bank and United bank lowered their interest rate; PSU giant SBI and the country's largest private bank, ICICI Bank, indicated that they will soon pass on the benefit to their customers.
Since the rate cut isn't much, auto industry players think that it could have been more, as it's already too late.
General Motors India India Vice-President P Balendran said, "While this is definitely a welcome move, but it is too little too late. We were expecting a rate cut of 50 basis points."
"On the auspicious occasion of Pongal, Makar Sankaranti and Uttarayan, the RBI Governor has extended the Prasad of rate cut. The sweetness is doubled due to the surprise announcement and provides wind in the sails of economic activity. Though there could be views that the cut could have been deeper, it is not the size of the cut, rather the direction of interest rates that the RBI has signalled through this cut that is meaningful. The RBI's reading of inflation and inflation expectations have given a further boost to positive sentiments. We now expect banks and credit providers to follow the RBI's cue by reducing interest rates so that investment and consumer demand improves. The monetary action today augurs well for the future.", Mr VS Parthasarathy, Chief Financial Officer, Group CIO, EVP - Group M&A & Member of the Group Executive Board, Mahindra & Mahindra Ltd
With inputs from PTI
