Repo rate cut surprise

THE Reserve Bank of India (RBI) cutting its key repo rate by 50 basis points to 5.5 per cent is twice the reduction the markets had anticipated. That the surprise move comes amid global uncertainty and trade war worries marks a policy pivot to revive demand and stimulate credit. The monetary policy committee, led by RBI Governor Sanjay Malhotra, has now cut rates by 100 basis points this year. Sectors like housing, auto and real estate are set to gain from improved affordability. Softening of interest rates is expected to significantly increase buyer confidence, as the EMIs or the tenure of the home loan will come down. Lower borrowing costs could benefit households and businesses alike, spurring a consumption-led recovery.