1. RBI’s repo rate cut to boost credit offtake, home and car loan rates may come down by upto 20 basis points

RBI’s repo rate cut to boost credit offtake, home and car loan rates may come down by upto 20 basis points

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.

By: | New Delhi | Updated: October 4, 2016 5:57 PM
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 filip to borrowing, especially retail loans which can come down betweeen 10-20 basis points, feel experts. (Reuters) 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 filip to borrowing, especially retail loans which can come down betweeen 10-20 basis points, feel experts. (Reuters)

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.

  1. N
    Narendra M
    Oct 4, 2016 at 12:26 pm
    (1) When would RBI and the Central government recognise that the number of depositors is far bigger than that of borrowers? RBI rate cut has a definite (and adverse) impact on rates of interest on fixed deposit of banks. Today’s rate cut too would prompt banks to lower rates of interest on fixed deposits. (2) As we have seen during last twelve months or so, banks have continuously lowered interest on fixed deposits. The rates on small savings scheme have too been lowered with effect from 1st April, 2016. There is big section of senior citizens in our country who are not pensioners, whose main source of income is interest. This section of senior citizens will face hardship and faces risk of capital erosion at a fast pace. But is there anyone who cares? Obviously, NDA government thinks that every senior citizen is a Central government pensioner and since there is a hike in pension as per the 7th Pay Commission, no one would complain about falling rates of interest on banks deposits and saving schemes.
    Reply
    1. N
      Narendra M
      Oct 5, 2016 at 1:51 am
      Your argument that most of senior citizens have already locked their money in FDs at a higher date is simply an eyewash. Those who suffer know- every renewal has been at a lower rate during last two years. If interests of senior citizens cannot be protected by the Central government and if they should suffer in the larger interest of economy, let it say so.
      Reply

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