There is a very good news for the people dreaming of buying a house and the existing borrowers. The EMI burden on your pocket is going to become lighter. The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has taken a step due to which home loan interest rates can reach a historic low.
The Reserve Bank has reduced the repo rate by 25 basis points, bringing it down to 5.25%. This decision will have a direct impact on your pocket. Currently many banks like Union Bank, Bank of India, Bank of Maharashtra and Indian Overseas Bank are offering home loans at the rate of 7.35%. Experts believe that after the repo rate cut, these rates may come down to 7.1%.
Direct savings of Rs 1,440
Meaning if you have taken a home loan of Rs 1 crore for 15 years, then a reduction of 0.25% means a direct saving of about Rs 1,440 in your monthly EMI. This savings becomes a huge amount in a year, which is a big relief for the middle class family. However, banks will have to change their strategies to pass on the benefit of 7.1% interest rate to new customers. Bankers say that to give loans at such low rates, they will have to drastically cut their deposit rates. Unless deposit rates are reduced, there may be pressure on the profits (Net Interest Margins) of banks. Not only this, if banks revise their spreads above the benchmark rate, an interesting situation may arise.
Common man will get great relief
While banks may take some time to adjust their interest rates, non-banking finance companies (NBFCs) will get the benefit immediately. Umesh Revankar, Executive Vice President, Shriram Finance, says that this policy is especially helpful for ‘last-mile financiers’ i.e. financial companies operating in remote areas.
The announcement of Government Securities Purchase (OMO) of Rs 1 lakh crore by RBI to maintain liquidity will maintain cash flow in the market. Its direct benefit will be to small truck owners, rural entrepreneurs and those in the MSME sector, who are the real engine of the country’s 8.2% GDP growth. Due to low interest rates, these small traders working at the grassroots level will be able to get cheap loans.
