Report by OD Mumbai Bureau:   Are you paying EMIs for any home loans, car loans, any other consumer loans on a floating rate basis? There is more bad news for you as the RBI kept rates unchanged. Today, the central bank cut only 25 bps of cash reserve ratio (CRR) to 4.25% from 4.50%. Both repo and reverse repo rates are kept unchanged at 8% and 7%, respectively. With the current high inflation regime and lack of scope for fiscal measures, the RBI kept key rated unchanged. This step has dashed hopes for early downward interest rate cycle.

Impact on consumers: Although CRR was reduced by 25 bps (100 bps is equal to 1%), there will be hardly impact on lending rates. So, the home loans, auto loans, personal loans will continue to remain at uncomfortable levels. Consumers will continue to pay high EMIs on loans. But, deposit rates will continue remain at the same rates, which is a good news for savers and senior citizens, who will enjoy high interest payouts on fixed deposits. 

RBI outlook economy:  The central bank cut economic growth forecast for 2012-13 to 5.8% from 6.5% earlier projection in July. The RBI revised upwards average inflation for 2012-13 to 7.5% from 7.0% earlier. These two projections are a reflection of the presence of growth risks in the system.   

Impact on market:    Although market participants have expected a hold on rate cut, the growth risks highlighted by the central banks are a concern. Markets expect more friendly and proactive measures apart from the recent bold moves by the government to revive growth.