The rate cut by the RBI will give a boost to the Indian economy by providing affordable Loans to small businesses and homebuyers Said by Finance Minister Piyush Goyal.
RBI’s decision to reduce the repo rate by 25 basis point from 6.5 percent to 6.25 percent and change of stance to ‘Neutral’ will give a boost to the economy, lead to affordable credit for small businesses, homebuyers etc and further boost employment opportunities,” Goyal said in a tweet.
It is a very balanced and pragmatic policy statement said by Economic Affairs Secretary Subhash Chandra Garg with Welcoming the RBI’s decision.
“Assessment of growth and inflation is quite realistic and underlines low inflation and high growth path for India for 2019-20. Welcome change of stance to neutral and rate cut by 25 bps. Also welcome removal of FPI restriction,” Garg tweeted.
It was fixed that no foreign portfolio investor (FPI) should be given an exposure of more than 20 percent of its corporate bond portfolio to a single corporate, including exposure to entities related to the corporate. As a part of the review of the FPI investment this was decided in corporate debt undertaken in April 2018.
Exemption were given to FPIs from this requirement till end-March 2019 to adjust their portfolios on their new investments.
The RBI in its sixth bi-monthly policy said it is now proposed to withdraw this exposure limit, In order to encourage a wider spectrum of investors to access the corporate debt market.
RBI hiked repo rate, the rate at which the central bank lends short term money to commercial banks, by 25 basis points (0.25 per cent) to 6.50 percent. This is expected to lead to higher interest rates on housing, auto and other personal loans. This is first time in nearly five years that RBI has hone for a back to back hike, having increased repo rate by 25 bps to 6.25 percent in its last policy meet in june. Last time RBI had increased the repo rate consecutively in 2013. Trade tensions, crude oil prices, poor economic activity, rising retail inflation have been considered as the primary factors behind the hike in repo rate.
I think that hike in repo rate will impact the real estate sector as the revised rate would result in costlier EMIs for the home loan.