Repo rate reduction to reduce the interest liability of the government and corporate honchos.
Repo rate is the short term rate at which banks borrow from RBI against government securities. Today,RBI has reduced repo rate by 0. 5%. Few months back, It has reduced by 0.25%. It will reduce lending rate and encourage borrowing and consumption led economic activities. But savers are worst sufferers. Actually, consumers are not much benefitted as benefits of reduction of rate are not passed to consumers in the same proportion of reduction of reporate,. The real beneficiaries are the government and corporations. The government is the biggest borrower while Corporates are the second biggest borrowers . Their interest liabilities are reduced. That is why, any RBI governor/ Monetary policy committee members can not retain their position if become reluctant to reduce repo rate.
Dr Santosh Kumar Mohapatra
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