Raghuram Rajan may not have gifted you a rate cut in his last monetary policy review before his term ends as RBI governor, but analysts expect some ‘acche din’ for you in the form of lower EMIs this festive season. Come October, the Reserve Bank of India is likely to cut repo rate by at least 25 basis points, say economists. Additionally, with RBI focusing on rate cut transmission, and banks indicating that they will be in a better situation to transmit rate cuts, you may see a dip, though probably marginal, in your home, car and personal loan EMIs.

DK Srivastava, Chief Policy Advisor at EY India tells FE Online, “I expect that RBI will cut rates by 25 basis points in October. Additionally, with 7th Pay Commission doleouts, the savings level in the economy is expected to go up. This will allow banks greater room to cut rates and transmit earlier rate cuts by the RBI. So in that sense, I expect marginal relief for borrowers in this festive season on the EMI front.”

CRISIL also expects the next rate cut from RBI to be in the October policy review. “We expect another 25 bps cut this fiscal – which could come as early as October,” it says in a report. But, more importantly, CRISIL sees policy transmission to improve for two reasons. “One, the government has cut the small-savings rate, effective April 1, 2016, giving more room to banks to reduce their deposit rates. This, in turn, will help reduce the cost of funds, which is a key component when pricing loans. And second, the shift to marginal cost of funds based lending rate (MCLR) for pricing loans will also bring down lending rates,” the research house says.

Also read: What prevented Raghuram Rajan from cutting rates in his last review?

Bank of America Merrill Lynch is disappointed that Rajan maintained status quo in his last monetary policy review. “We now expect the next 25bp repo rate cut on October 4 and 50bp overall by March 2017,” says Indranil Sen Gupta, India Economist at DSP Merrill Lynch (India). “On our part, we expect the RBI to cut 25bp on October 4 to signal to banks to cut lending rates just before the October-March busy season sets in and 50bp by March. It would have been easier for banks to transmit a RBI rate cut signal into lending rate cuts now than closer to the busy season,” Sen Gupta adds.

Rajan from his end has assured that there will be some revisions in the MCLR framework. “On our side, having examined our experience with the MCLR framework, we will shortly be suggesting some revisions. However, substantial pass through (of rate cuts( will happen only as corporate credit demand picks up, and public sector banks, strengthened by clean balance sheets, compete for corporate business,” he said. The governor also took a swipe at banks for only ‘modestly’ passing earlier cuts. “Despite easy liquidity, banks have passed past rate cuts into lending rates only modestly. Earlier, some bankers said that it was the lack of liquidity that was holding rates high, now I hear from some that it is fear of the FCNR(B) redemptions that is making them reluctant to cut rates. I have a suspicion that some new concern will crop up once the FCNR(B) redemptions are behind us,” he said.