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12:01 am - Wednesday October 18, 2017

Cut in Bank Rates

The Reserve Bank Monetary Policy Committee has lowered the Repo rate by 0.25 basic point making it from 6.25 to 6 per cent. Earlier in October 2016 Repo rates were brought down. These rates are at the lowest after November 2016.

The Repo rate is the rate at which RBI lends to bank. The RBI expects the commercial banks will also lower its lending rate. It is expected that now the home and car loans interest and its EMI will come down giving relief of Rs.4,000/- The Reserve Bank Governor Mr.Urjit Patel said the retail inflation has fallen to five year low at 1.5 per cent in June and expected to remain in down trend for longer time.

The Reserve Repo Rate have come down from 6 to 5.75 per cent, bank rate 6.25 per cent, Marginal Standing Facility rate 6.25 per cent, Cash Credit Ratio (CRR) kept static at 4 per cent. The inflation may go upto 4 per cent and the growth rate estimate is 7.3 per cent as it is.

The monetary review will be on October 3-4 next The factors that were taken into account to reduce the bank rates the retail inflation at the lowest at 1.54 per cent, to keep pace with the GST and better monsoon activity. It is also felt that personal investment is still weak but this rate cut will give impetus to it. The Governor expressed displeasure at the attitude of banks in not transferring such rate cut benefit to its customers.

The RBI expects even now the bank will decide to do it for the customers to realize that RBI decision is for them also. The Reserve Bank is distressed over the trend of farmer loan waiver in the states one after another in a competitive way. Almost all the eminent economists, the RBI and other bank executives have warned that it was very dangerous for the economy of the nation.

The farmers will become habitual of it for all time to come. They will take loans and wait till next elections taken it as granted that parties would promise to waive the loans on getting elected. The people of other sections of society will follow the trend of not taking repayment of loans seriously. Such loan waivers will adversely affect the state treasuries.

The European nation Greece has suffered the deficit financing upto level of bankruptcy and disturbing the economies of all European nation in bail out of financial mess and upsetting the Euro currency in its exchange value. The RBI Governor warned that such loan waivers will push prices and inflation.

Mr.Shivraj Singh Chouhan is the only Chief Minister in India who firmly rejected the idea of loan waivers for the farmers. He is helping the farmers in so many other ways and his efforts recorded highest food grains production in India is in Madhya Pradesh, with highest agricultural growth rate in the country.

The state is getting for last four year, the Central Government Krishi Karman Award successively for highest food grains production in India. The other state should heed warning and advice of economists and banking sector and give up loan waivers. It is a question of national economy and it should always remain on sound basis.

Posted in: Editorial

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