Loan customers, rejoice! EMIs to get cheaper soon
Bringing double cheer to the both India Inc and the common man across the country, the Reserve Bank of India has slashed the repo rate by 25 basis points. The move would now mean that loans are all set to become cheaper.
“The move will boost both investments and demand growth in the country. The banks will have more leg-space to lend as the rate cut will infuse more liquidity in the bank,” said Suresh Prasad, former chief manager for asset recovery with Syndicate Bank.
On the personal loan front, EMIs for both home and car loans will become cheaper as well. Consumers will end up paying a lower rate of interest as banks will follow suit.
Commenting on RBI’s move to cut key policy rates, MoS Finance Jayant Sinha said that it will provide a near-term boost to the economy. “We have limited room to provide relief to tax payers. But with RBI rate cut, I see EMIs coming down significantly.”
This comes as a huge relief to both the auto and real estate sector as the demand for the products has been low and the consumer sentiment has been cautious in the market. “A lot depends on the rate of interest at which the loans are available to a buyer. The rate cut is expected to boost the demand especially in these two key sectors,” noted Prasad.
It should be noted that the RBI has cut the repo rates by 25 basis points, that is, from 7.75% to 7.5% with immediate effect. The apex bank explained that the real fiscal consolidation could be higher than the headline numbers contrary to the projections made earlier. “The government has emphasized its desire to clean up legacy issues which gave a misleading picture of the true extent of fiscal rectitude, and has also moderated the optimism in its projections. Also, the government is transferring a significantly larger amount to the states, without entirely devolving responsibility for funding central programmes. To the extent that state budget deficits narrow, the general fiscal deficit will be lower,” RBI governor Raghuram Rajan said at the Monetary Policy Review Meet.
He added, “Furthermore, supported by lower international energy prices, there is a welcome intent to shift from spending on subsidies to spending on infrastructure, and to better target and further reduce subsidies through direct transfers. Finally, the central government has signed a memorandum with the Reserve Bank setting out clear inflation objectives for the latter. This makes explicit what was implicit before – that the government and the Reserve Bank have common objectives and that fiscal and monetary policy will work in a complementary way.”
Besides, our domestic currency rupee too has remained relatively stable over peer countries.