RBI has decreased the lending rate by 0.25% and now it stands at 6.25%. This is the first rate cut after 5 years. This is happening because the inflation is increasing and the demand is decreasing. And decreasing the repo rate will actually benefit the people who have loans because then their interest rate will come down, the more money people will have in their hand, more purchase and it might be good for the economy.
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The problem India is facing is that our Rupee is declining like anything against the dollar and this is not helping the economy of India. The foreign reserves are decreasing because of the dollar decreasing. And with Trump trying to increase the tariff to everyone, it will not help India.
Now coming back to the RBI decreasing the lending rates. This is the double benefit for the Indian citizens. Recently our Income Tax has decreased that means there will be more money in the hand of the people and with this decreasing rate there will be even more money in the hand of the people who have loans. And with this double benefit there will be more money in the hand of the people which will increase the spending along with that there will be more money for investments.
The people who gave the Home Loans will be very happy because mostly the home loans are floating rates and thus the interest rate will be decreased for them. Again if someone is actually investing in Fixed Deposit, then they should invest now because that will help them to lock the best rates for the longer time otherwise the bank will reduce the interest rate given to you in the Fixed Deposit.
So this lending rates cut was there in the cards, the question was when and we got it. Now the thing is we have to see how this as well as Income tax cut will help the economy to revise otherwise there will be more rate cuts in the future.
