After RBI cuts repo rate, banks start passing benefits to customers

Axis Bank, private sector bank in India, reduced its base rate by 35 basis points to 9.50% with effect from October 05, 2015.

The base rate is the minimum rate of interest at which a bank lends to its borrowers.

India’s stock markets reversed losses while the benchmark 10-year bond surged to its highest in more than two years after the Reserve Bank of India (RBI) cut interest rates by a bigger-than-expected 50 basis points and allowed for steady increase in foreign investment limit in government securities. Most market players had expected the central bank to cut the rate by the 25 basis point increment seen in the other decreases since the turn toward monetary easing in January.

Andhra Bank also announced a 25 bps cut in base rate to 9.75 per cent effective Tuesday itself. However, there is no change in CRR and SLR. while complimenting Union Finance Minister Arun Jaitley for impressing upon RBI to make impressive cut in repo rates said that it was long awaited demand of trade and industry including CAIT which has exceeded the expectations.

The Reserve Bank of India on Tuesday reduced the repo rate by 0.5%, triggering hope to enhance the domestic investment cycle and push growth.

Rajan justified the reduction saying consumer inflation was likely to be at 5.8 per cent, below the 6 per cent target for January.

The GDP growth target for the financial year 2016 has been lowered to 7.4 per cent from 7.6 per cent. The Central Bank also warned that the poor monsoon would be an impediment in controlling inflation.

Pressure had been growing for a reduction in interest rates after Mr Rajan kept them on hold last month, following three cuts earlier this year.

ICICI Bank chief Chanda Kochhar indicated that her bank will lower rates by at least 0.25 percentage points. “Bank deposit rates have, however, been reduced significantly, suggesting that further transmission is possible”, the governor said.

In a BSE filing BoB said it has decided “to reduce base rate by 25 basis points from 9.90 percent per annum to 9.65 percent“.

The RBI revised its growth forecast to 7.4% from 7.6% and gave cues about firming up of inflationary trends.