CONCERNED over the slide of the economy from the consistent level of over 7 pc to 5.8 pc, lowest in the last five years, the Monetary Policy Committee (MCP) of the Reserve Bank of India (RBI) has once again lowered its lending rate by 25 basis points, a third such reduction in recent months that is aimed at boosting demand and reducing borrowing costs for investors.

 

The next logical step, as desired by the MCP, is for the commercial banks to pass on the benefit to borrowers. Automobile, housing and other borrowers are bound to feel enthused by the RBI’s latest positive stance towards boosting demand and investment, at the same time keeping a close watch on inflationary tendencies that may build up as a seasonal phenomenon. The RBI’s latest positive stance on interest regimes comes in the wake of the new Government’s priorities to boost employment and investment in the private sector. In keeping with this agenda of the Government it would be interesting to watch what policy initiatives the new Finance Minister announces.