Monday, 10 October 2016

RBI REPO rate cut, not so good news.

  • RBI announces REPO rate cut again within 6 months.
  • Good news for borrowers, businesses & industries.
  • Bad news for depositors, savers and retired people.
  • Banks may not pass on all the benefit.
  • Existing home loan borrowers will only see benefit of reduced number of EMIs only.
    i.e. last few EMIs he need not be paid. But their EMI value remains unchanged.
  • Inflation as claimed by RBI is 5% (means in reality, retail inflation would be over 8%) which will look north wards. Common man can expect difficulties in next one year.
  • Reducing REPO rate at the sight of good monsoon and increased agriculture activity by RBI is a hasty step. It should have waiting for these things to happen and its impact felt on the national economy then only announce REPO rate cut. That would have been prudential. 
  • RBI Governor making decisions under influence of Finance Ministry will prove to be havoc in long run.
  • Previous three governors never obliged FM and hence our economy, our monetary system and our banks were not effected international financial turbulence in USA and Europe etc in the past decade.
My View:
Aggressive REPO rate cut within 6 months without consolidiation of benefit of good monsoon indicates not the knowledge and capability of RBI Governor but his willingness to tow the line of Finance Minster who usually talks about common man and controlling inflation but actually works for the benefit of borrowers, businesses and industries.

Abdicating from the primary responsibility of (1) inflation control, (2) managing the monetary system effectively and dancing to the tune of FM by RBI could prove suicidal in long run for the nation.

Urjit Patel should learn some things from his predecessors like RRR, DV Subba Rao and YV Reddy, who never bothered for the comforts of FM but only did what ought to be done by RBI.

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