BENGALURU: Reserve Bank of India (RBI) is planning to cut the repo rate (the rate at which banks borrow from the RBI) by 25 basis points in its monetary policy review given on Tuesday. The short term lending rate of repo was 25 basis points to 7 percent in its fourth bi-monthly review of this week, according to businesstoday.in.

Transmission Of Interest Rates:

The delay in transmission of the interest rates in monetary transmission as 75 basis points reduction has only resulted in a 25 to 30 basis points reduction which is the minimum lending rate in bank’s base rate. However, this should not come in the way of cutting interest rates as RBI is now devising other ways for faster transmission to retail as well as corporate borrowers.

The Proposed Rate Hike By The U.S. Federal Reserve (Fed):

The proposed rate hike of the U.S. Federal Reserve is still looming around and RBI have to prepare its policy rate immediately as the Indian central bank may find it difficult to do so when the Fed rates are high. However, many believe that this could happen as early as September.

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