After a gap of nine months, the Reserve Bank of India reduced repo rate, following this bank's lending rates are likely to be less expensive but their might be dip in their net interest margins in the coming quarter.
RBI has reduced the repo rate (rate at which the central bank lends money to the banks) by 25 basis points. The cash reserve ratio was also reduced by the same margin i.e. 25 basis points to persuade banks to cut their lending rates in a tight liquidity environment.
"Some banks said their margins will come under pressure. But the overall message we got was monetary policy transmission will take place. We are confident of transmission taking place because of the CRR cut. We had discussed it internally and the decision was to ensure monetary policy transmission we should do a CRR cut," RBI governor, Mr. Subbarao said, following RBI's third quarter review of monetary policy for 2012-13.