Winning Bizness Desk

Mumbai. Interest rates on loans in India may see a reduction from December as central banks globally adopt softer monetary policies. This development could bring down borrowing costs, allowing loans to be availed at cheaper interest rates starting from the January quarter. A report by UBS has suggested that inflation rates in India are consistently falling, which may lead the Reserve Bank of India (RBI) to lower interest rates. According to the report, inflation in the current fiscal year could be 0.30 percent lower than the RBI's estimate of 4.5 percent. In August, inflation stood at 3.65 percent, signaling a steady decline. As a result, there is a growing expectation that the RBI may cut interest rates by up to 0.75 percent in the coming months.

Stable Repo Rate Since February 2023

The RBI has kept the repo rate stable for the last nine consecutive Monetary Policy Committee (MPC) meetings, with the most recent decision made in February 2023. This was done in response to concerns about food inflation, which continues to pose a significant risk to overall price stability in the country. RBI Governor Shaktikanta Das has reiterated that any future adjustments in interest rates will be made with a long-term view on inflation control. Despite stable interest rates, the softening inflation has created room for a potential rate cut. As inflation continues to remain below the RBI's target, the central bank may consider loosening its monetary stance in order to stimulate borrowing and economic growth.

Global Monetary Easing

India is not alone in this trend. Central banks across the globe have started easing monetary policies to boost their economies. Just last week, the U.S. Federal Reserve cut its interest rates by 0.5 percent, following similar moves by other countries. This global shift towards lower interest rates has increased the likelihood that the RBI will follow suit in its next policy review.

Upcoming RBI Monetary Policy Committee Meeting

The RBI's next MPC meeting is scheduled to take place from October 7 to 9. Financial experts and market analysts are closely watching the outcome of this meeting, as it will provide clearer insights into the RBI's stance on interest rate adjustments. If the RBI opts for a rate cut, it could lead to cheaper loans for consumers and businesses, spurring demand for credit. Lower interest rates would particularly benefit those seeking home, auto, and personal loans, as borrowing costs would decrease, making it easier for individuals and companies to finance their expenses and investments. With inflation rates trending downwards and global central banks reducing rates, there is increased optimism that Indian borrowers will benefit from cheaper loans starting in the upcoming months.