Mumbai — Loan interest rates in India are expected to decrease from December, as central banks around the world shift towards more accommodative monetary policies. This could significantly lower borrowing costs, with cheaper loans becoming available in the January quarter. A recent report by UBS suggests that inflation rates in India are steadily declining, which may prompt the Reserve Bank of India (RBI) to lower interest rates. The report indicates that inflation for the current fiscal year could be 0.30 percent lower than the RBI’s projected 4.5 percent. In August, inflation was recorded at 3.65 percent, signaling a downward trend. As a result, there is growing anticipation that the RBI may cut interest rates by up to 0.75 percent in the coming months.
Repo Rate Stable Since February 2023
The RBI has maintained a stable repo rate for the past nine Monetary Policy Committee (MPC) meetings, with the last change made in February 2023. This decision was influenced by concerns over food inflation, which continues to pose a risk to the country’s overall price stability. RBI Governor Shaktikanta Das has emphasized that any future rate adjustments will be based on long-term inflation trends. Despite the steady repo rate, the recent drop in inflation has opened up the possibility of a rate cut. With inflation staying below the RBI’s target, the central bank may consider a more flexible monetary stance to encourage borrowing and stimulate economic growth.
India is part of a broader trend, as central banks globally have begun loosening monetary policies to support their economies. Last week, the U.S. Federal Reserve cut interest rates by 0.5 percent, joining several other countries that have reduced rates in recent months. This global move towards easing rates further increases the likelihood of the RBI taking similar steps in its next policy review.
The RBI’s next MPC meeting is scheduled for October 7-9. Financial experts and market analysts are closely monitoring the outcome, as it will provide insight into the RBI’s approach to interest rates going forward. If the RBI opts to reduce rates, it could lead to cheaper loans for both consumers and businesses, spurring demand for credit. Lower interest rates would especially benefit individuals seeking home, auto, and personal loans, as reduced borrowing costs would make it easier to finance purchases and investments. With inflation trending downward and global central banks cutting rates, optimism is growing that Indian borrowers will see lower loan interest rates starting from December, providing a boost to both the economy and consumer spending.
