The Reserve Bank of India has cut interest rates for the third time this year in a move to spur India’s economy, with inflation well below its target level. The RBI lowered the benchmark repo rate by 25 basis points to 7.25 percent with immediate effect. RBI governor Raghuram Rajan said the cut was necessary to boost investment and called for banks to pass on the lower borrowing costs to customers.
If private banks do reduce the interest rate they charge customers, it could lower the monthly outgo of some NRIs who may be repaying a mortgage back home. It may also lower the cost of fresh borrowings by resident and NRI customers.
The governor has made controlling inflation a priority, hoping to bring it bellow 6 percent by next January, and to 4 percent for the 2016-17 financial year.