The Reserve Bank of India, or RBI has cut the repo rate by 100 bps to 8% with immediate effect. This is the first repo cut since 2003.

The Finance Minister, P Chidambaram said that the repo rate cut will help in moderating inflation. This is a positive move which will enthuse both borrowers and investors, the FM added. The RBI’s move is consistent with the government’s aim of maintaining high growth, he added.

According to officials at the Indian  Overseas Bank, there is need to see the impact of this move on cost of deposits before passing it on to the consumers. There is a clear signal from the RBI to boost the economy, they said. Meanwhile, Officials at Oriental Bank have said that the repo rate cut is aimed at bringing down loan rates.  

Ambareesh Baliga of Karvy Stock Broking felt the move would not have an immediate impact on stock prices. “Whatever you do for the banking system will not be enough for the markets because the markets have their own problem and that is lack of confidence,” Baliga said. “Confidence will not come just because of a CRR cut or a repo rate cut,” he added.

Gautam Vir, MD and CEO, Development Credit Bank hailed the rate cut as a welcome move. It will help in boosting positive sentiment, he added. He expected a 50 bps cut in the policy meet; the 100 bps move is above expectations, he added. However, Vir feels that there is still a need to pump in more liquidity in the economy.

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