RBI Cuts Repo Rates By 0.25 per cent; Auto Loans Likely To Get Cheaper

Car loans are currently available at an average of 11 per cent interest and while we wait to find out by how much this rate is likely to go down by, the auto industry is definitely looking forward to a possible rate cut.

By Carandbike Team

1 mins read

Published on August 3, 2017

Highlights

Repo rates will now reach a 7 year low of 6 per cent
Car loans are currently available at an average of 11 per cent interest
The automotive industry looks forward to a positive growth this year

The Reserve Bank of India (RBI) announced a 0.25 per cent cut in the repo rate in its third bi-monthly monetary policy review. This will have a direct effect on the interest rates which will now reach a 7 year low of 6 per cent. The decision to reduce key lending rates comes after four policy reviews in which the repo rates remained unchanged. The central bank reduced it by 25 basis points to 6.25 percent only last year in October. "The decision of the MPC is consistent with a neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of plus, minus 2 per cent, while supporting growth," the third bi-monthly monetary policy statement said. This in turn means that loans will get cheaper and for us that spells good news for those wanting to buy an automobile or even homes. We are however interested in the former and are very happy that auto loans are likely to get cheaper which means the spending capacity will definitely increase and more people will now buy cars. Arundhati Bhattacharya, Chairman, SBI said, "The RBI decision to cut repo rate was a welcome move and will perk up market sentiments. The policy commentary was nuanced and balanced indicating upside risks to inflation have waned, whereas growth impulses in industry and services are weakening. We are hopeful that this measure should enable a gradual recovery in credit cycle with a revival of demand." Also Read: Cars And Bikes Get Cheaper Thanks To GST Car loans are currently available at an average of 11 per cent interest and while we wait to find out by how much this rate is likely to go down by, the auto industry is definitely looking forward to a possible rate cut. Sumit Sawhney, Country CEO & Managing Director, Renault India Operations, said, “With the macro-economic headwinds like the retail and wholesale inflation at an all-time low, current account deficit under control, a rate cut by 25 basis points by the RBI in its third bi-monthly monetary policy review is well-timed and justified. Further, the industrial growth continues to remain subdued. The rate cut would give a fillip to the market sentiment as the Indian stocks are trading at a record high. In addition, the government unveiled the GST on July 1, raising confidence among investors. It is a welcome and much needed measure which will cheer up the entire automobile industry and will further provide a boost to the economy. However, the real impact of this rate cut will be visible when the commercial banks pass on the benefit to the end consumers by lowering the interest rates on car loans," Giving us a better understanding on the way this rate cut will affect the automotive industry was Abdul Majeed, Partner Price Waterhouse said, "The RBIs 25 basis points cut in the report rate is a good move. It will surely lead to more demand for automobiles amongst customers. The monsoons have been good so far and with GST benefits settling in, commercial banks will surely pass on the benefits of reduced loan rates to the customers."