Did the Bank of India Just Slash Its Lending Rate After RBI's Repo Rate Cut?
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Synopsis
The Bank of India has made a bold move by slashing its repo-based lending rate following the RBI's recent repo rate cut. This article explores the implications of these changes on the economy and how they affect borrowers and investors alike.
Key Takeaways
- Bank of India reduced its RBLR to 8.35%.
- The RBI cut the repo rate to 5.5%.
- CRR reduced to 3% over four phases.
- GDP growth forecast remains at 6.5%.
- Inflation forecast revised down to 3.7%.
Mumbai, June 6 (NationPress) On Friday, Bank of India (BOI) announced a reduction in its repo-based lending rate (RBLR) by 50 basis points, decreasing it from 8.85 per cent to 8.35 per cent.
This adjustment follows the Reserve Bank of India's (RBI) recent decision to lower the repo rate by 50 basis points, bringing it down from 6 per cent to 5.5 per cent.
The central bank's strategy aims to enhance economic activity by making borrowing more affordable for both businesses and individuals.
The RBI's Monetary Policy Committee (MPC), under the leadership of Governor Sanjay Malhotra, made this rate cut announcement during its latest policy meeting.
Governor Malhotra highlighted that with these rapid rate cuts, the MPC sees limited potential for further reductions to bolster growth.
In conjunction with the repo rate cut, the RBI also lowered the Cash Reserve Ratio (CRR) by 100 basis points.
The CRR, which represents the minimum reserves banks are required to maintain with the RBI, will now decrease from 4 per cent to 3 per cent.
This change will be implemented in four phases and is projected to infuse approximately Rs 2.5 lakh crore into the banking sector's liquidity.
Additionally, the RBI shifted its policy stance from ‘accommodative’ to ‘neutral’, indicating that future interest rate decisions will be contingent on economic performance rather than solely aimed at stimulating growth or controlling inflation.
Despite these rate reductions, the RBI has kept its GDP growth forecast for the current fiscal year steady at 6.5 per cent.
The quarterly growth projections remain unchanged at 6.5 per cent for the first two quarters, 6.7 per cent for the third, and 6.6 per cent for the fourth quarter.
Regarding inflation, the RBI has revised its full-year forecast down from 4 per cent to 3.7 per cent.
The inflation expectations for the first two quarters have also been adjusted downward to 2.9 per cent and 3.4 per cent, compared to previous forecasts of 3.6 per cent and 3.9 per cent.
Meanwhile, the stock of Bank of India responded modestly to this announcement, closing 0.1 per cent higher at Rs 124.3 on the National Stock Exchange (NSE) on Friday.
In contrast, the benchmark Nifty index rose by 1.02 per cent. This year, Bank of India shares have appreciated by 22.06 per cent, with a 5.54 per cent increase over the past 12 months.
Point of View
The recent lending rate cut by the Bank of India, following the RBI's adjustments, reflects a calculated effort to stimulate economic growth. This balanced approach is critical in navigating current economic challenges, ensuring that both businesses and consumers benefit from affordable borrowing rates while maintaining a watchful eye on inflation.
NationPress
11/07/2025
Frequently Asked Questions
What is the new lending rate of Bank of India?
The new repo-based lending rate (RBLR) of Bank of India has been reduced to 8.35 percent.
Why did the RBI cut the repo rate?
The RBI cut the repo rate to stimulate economic activity by making loans cheaper for businesses and individuals.
What does a reduction in the Cash Reserve Ratio mean?
A reduction in the CRR means that banks will hold less money in reserve with the RBI, allowing them to lend more to the economy.
How will these changes affect borrowers?
These changes are expected to lower borrowing costs for consumers and businesses, making loans more accessible.
What is the current GDP growth forecast by the RBI?
The RBI has maintained its GDP growth forecast at 6.5 percent for the current financial year.
