Borrowing cost may come down with RBI lowering repo rate by 25 basis point in line with market expectation and ensuring easy liquidity for banks, areport appeared in ‘The Economic Times’ has said.
New repo rate is now 6.50 percent as RBI reduced it after a gap of six months.
Repo rate was lowered by 150 bps since January last year, when central bank begun its accommodative cycle.
Governor Raghuram Rajan said latest policy action would be more effective as banks moved to marginal cost-based lending from April 1.
As per RBI estimates, borrowing cost has already become cheaper by 25-50 bps even before the policy announcement with the new system being in place.
"Marginal cost-based lending will help rate cut transmission," Rajan said in his post-policy media interaction.
Central bank has eased liquidity management for banks by cutting the minimum daily maintenance of banks' cash reserve with it to 90 percent from 95 percent of the requirement. This will be effective from the fortnight beginning April 16.
"Major focus of the policy is to address liquidity issues," Rajan said.