A boom again..; As inflation takes it!

January 15^th 2015, RBI governor announced a rate cut of 25 basis points, inflation was a major driver for this rate cut.  Though further rate cuts were expected RBI was not very clear about the cuts further. Post budget, repo rate was cut further by 25 basis points. The first rate cut though had a good impact on banks, a borrower has no benefits from it. Only 47 commercial banks reduced their loan interest rate as they wanted to see better profit margins. But the second rate cut is expected to effect on borrower also. This rate cut has been estimated to have its effect on EMIs also.

The second rate cut was done due to some major reasons. They include RBI’s confidence over Modi’s governance and the confidence towards the budget’s impact. Through the budget’s schemes, it has been clearly analysed that investments is going to make a high stand for upcoming years which would benefit the economy and banks. So as mutual understanding, RBI has also planned to reduce the rates to give a glimpse of business ideas to borrowers. Also the inflation has been drived to control. GDP values have been revised which is manipulated to be 7.4%, and moreover last quarter India has been found to outperform China which is a great positive sign for economy growth. So all together, interest cut has also been accumulated to bring in a smile for Indian economy.

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