The Reserve Bank of India’s move to reduce the repo rate by 25 basis points to 6.25 per cent would provide a major fillip to borrowing, especially retail loans which can come down betweeen 10-20 basis points, feel experts. “RBI move will positively influence the borrowing environment. Home and car loan borrowers are likely to benefit. I expect banks to pass the cut between 10 and 20 basis points to borrowers,” Naveen Kukreja, CEO and co-founder, Paisabazaar.com said.
Puru Vashishtha, Adviser and Board Member, Deal4Loans, agreed.“The rate cut could lead to a very good borrowing environment, particularly for retail customers. We expect retail credit growth to inch up, and higher demand for mortgages and personal loan. Given the rationalisation in real estate prices, and low interest rate environment, we believe this is a good time to buy home and hence expect a significant uptick in first home mortgages. This is also a good time for small businesses to lower their working capital costs as well as to do capex using secured loans,” Vashishtha said.
Vashishtha expects lending rates to come down soon. “We expect rates to come down in the system. RBI is likely to signal to banks to lend more and revive private investments. Easy Monetary policy – lower rates and higher liquidity – will help transmission from monetary to real economy, which is much needed for Investment and consumption pick up,” he said.
Adhil Shetty, CEO, Bankbazaar.com, said borrowers under the base rate system can hope to see the rate cut reflect in the EMIs soon. “The 25bps cut brings down the repo rate to a six-year low of 6.25%. Borrowers can expect a reduction in their outflows. Existing borrowers on the base-rate model can expect the reduction to reflect in their EMIs or tenor in the next few weeks while those on Marginal Cost of funds based lending rate (MCLR) will have to wait for their next reset to see the effects,” Shetty said.
Anil Rego, founder and CEO, Rights Horizons felt that the RBI move would provide a boost to the economy. “The RBI’s lowering of rates will make loans to businesses and consumers cheaper. We hope that this will translate into better sales and profitability and a growth booster to the economy.
The positive outlook of Governor Urijit Patel on the government’s action on easing inflation will be a booster, indicating future rate cuts as inflation is reigned in,” he said.