For the first time in three years, the Reserve Bank of India announced a sharp cut in the rate at which it lends to banks — or the repo rate — by 0.50% to 8% to bring down banks’ lending rates to individual and corporate borrowers.
“This should help in investment revival and strengthen business sentiments,” finance minister Pranab Mukherjee said.
But if you are an existing customer, you will have the option of pre-paying your loan by borrowing from a bank that is offering lower rates.
The central bank raised its key policy rates 13 times during the March, 2010 to October, 2011 period to contain inflation and kept interest rates unchanged since its December policy review.
Chanda Kochhar, managing director and chief executive officer, ICICI Bank, India’s largest private sector bank, said, “These measures would reflect in a reduction in lending rates.”