'RBI rate cut will bring down housing loan EMIs'

The interest rate cut by the Reserve Bank of India is expected to give a boost to the economy and would also bring down the cost of housing loan installments, Minister of State for Finance Jayant Sinha said on Wednesday.

“We have said in Parliament that we are pursuing a very prudent fiscal consolidation road map. Our aim is to move growth to a sustainable, non-inflationary path... We are in a situation where we see housing EMIs coming down,” Sinha told reporters soon after the surprise rate cut by the RBI which took place even before the stock and money markets opened.

Chief Economic Advisor Arvind Subramanian said that the global rating agencies should look at upgrading India’s credit outlook.

"Now we have a 50 basis points rate cut within two months and I think that is good for the economy and all rate cuts benefit... If the outlook is looking good, the rating agencies should draw their lessons from that on improving the outlook,” Subramanian said in his press briefing.

After the Union Budget 2015-16 last week, rating agencies had ruled out any immediate upgrade in India’s sovereign ratings. The major cause was the delayed fiscal consolidation road map. Global and domestic rating agencies had also warned against any slippages from the “ambitious” disinvestment plan proposed in the Budget.

Revenue Secretary Shantikanta Das said that it augured well for business and would prompt people to go in for housing and consumer loans which will boost demand and growth.

India Inc said it expressed hope that banks would now lower lending rates for investment and consumer loans.

“Coming on the back of a growth-oriented Budget, the unexpected cut in headline interest rate by the RBI sends a huge positive signal that the central bank and the government are working in tandem to provide a robust scaffolding to growth, even while not losing sight of inflation, which has now been made explicit in the objectives of RBI,” CII Director General Chandrajit Banerjee said.

“Given the cut in the policy rate, we now hope to see transmission of this move in the form of lowering of lending rates by banks for investment and consumer loans,” Ficci President Jyotsna Suri said Assocham President Rana Kapoor said the RBI action will surely boost the morale of the consumers as also lower the interest costs of the industry. PHD Chamber President Alok B Shriram said, the rate cut will improve market sentiment and enable businesses to raise equity.