Reserve Bank of India
Reserve Bank of IndiaReuters

The Reserve Bank of India (RBI) cut the repo rate to 6.50 percent at its bi-monthly monetary policy review Tuesday. This is the first rate cut by the apex bank since September 2015.

At 6.50 percent, the repo rate stands at the lowest in the last five years.

In a series of changes, the central bank also narrowed the gap between lending and borrowing rates, reduced the statutory liquidity limit banks needed to maintain, and brought some moderation in the cash reserve ratio's daily balance.

It expressed confidence in its earlier growth forecasts, reiterating that the country will grow at 7.6 percent for the financial year 2016-2017.

In an apparent softening of the RBI's stance on six-month long tight liquidity, the Tuesday's policy changes collectively are expected to benefit the end consumers/customers to avail cheaper home and automobiles loans. 

Here is what ministers, company executives and industry bodies said:

Arun Jaitley, Minister of Finance

RBI's policy rate cut will provide a "good stimulus" to the economy and encourage banks to reduce lending rates.

Jayant Sinha, Minister of State for Finance.

"RBI actions today are very welcome. Obviously we believe that the rate cut which has been effective would be very good stimulus for the economy."

V.G. Kannan, MD and Group Executive, State Bank of India's Subsidiaries

"Liquidity conditions will be helped due to RBI's measures on cash reserve ratio, lower repo rate, lower SLR and open market operations. All of these indicate a time ahead for softer rates. As far as transmission goes, this particular reduction in rates has been more or less factored in while calculating MCLR. We have to wait and see how these reductions play out and what the eventual lending rate will look like."

Rana Kapoor, MD and CEO, YES Bank

"Following the exemplary fiscal rectitude displayed by the government in its FY17 Budget, RBI's 25 bps cut in the repo rate and the shift in stance towards neutral money market liquidity conditions is a testament of synchronous policy support. With global economic activity remaining subdued and domestic disinflation becoming entrenched amid low capacity utilisation, I expect further 125 bps monetary easing in the next 12-months".

Anshuman Magazine, Chairman & MD, CBRE South Asia Pvt. Ltd.

"The rate cut is likely to help lower borrowing costs and support growth further in 2016. It is expected that this benefit will be completely transferred to the borrowers, which will result in lower lending rates thus helping to revive housing sales".

Sunil Kanoria, President, ASSOCHAM

"The transmission in the interest rates at the ground level should factor in not only today's reduction in the Repo rate but also the new lending norms being effected by the regulator, besides adequate liquidity injection by the RBI should ease concerns of the banks over falling growth in deposits".

Confederation of India Industry (CII)

"The reduction in repo rate sends a strong signal that the RBI is continuing to maintain an accommodative bias in favour of growth in view of the benign inflation trajectory and deficient demand in the economy."