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Impact of RBI’s announcements: 5 things for borrowers, depositors and businessmen to know

Impact of RBI’s announcements: 5 things for borrowers, depositors and businessmen to know

The Monetary Policy Committee ( MPC) of the Reserve Bank of India (RBI) in an off-cycle meeting decided to cut the repo rate by 40 basis points (bps) to 4 per cent while the reverse repo rate was reduced simultaneously to 3.35 per cent. Prior to this, the RBI Governor held two pressers on March 27 and April 17, where it cut its repo rate to 4.4 per cent and reverse repo rate to 3.75 per cent. The RBI also decided to extend the moratorium on all term loans by another 3 months to provide relief to borrowers whose income has been hit due to the lockdown. The loan moratorium has now been extended till August 31.
Here is how the new steps by RBI impact the common man including borrowers, depositors and businessmen:

1. Impact on Deposit Rate and Small Saving rates – With the latest repo rate cut, the deposit rates of the banks may come down further. The same story plays out with small savings schemes whose interest rates are revised on a quarterly basis. Those investing in FDs, especially senior citizens who are mainly dependent on the interest income from these deposits, are likely to see a reduction in their income.

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