HOME, AUTO, BIZ LOANS MAY GET CHEAPER NOW

By cutting repo rate, RBI has tried to stimulate consumer demand, especially for automobiles and real estate. However, the lower lending rate would finally depend on banks.

There is mixed bag for those who have already taken loans. Borrowers whose loans are linked with an external benchmark, like repo rate, treasury-bills etc can expect to see their EMIs coming down in the next three months.

Loans which are linked to the marginal costbased lending rate will benefit only when their bank reduces rates, after six months or a year.

By cutting the repo rate, the RBI has tried to stimulate consumer demand, especially for automobiles and real estate, though a lower rate is bad news for fixed deposit investors.

The RBI had something to offer for MSMEs, corporates as well as exporters and importers. However, much will depend upon how fast the transmission happens and accumulated interest at the end of moratorium continues to be a worry.

The rate cut is good news for fence-sitters among automobile and home buyers. New loan rates will come down depending upon the transmission of the cut by banks.

“People who have decided to buy a home during the lockdown period will take a quick decision if banks pass on the benefit. Affordable housing will benefit the most as the buyers of this segment are very particular about the EMIs,” said Pradeep Aggarwal, chairman, Assocham–National Council on Real estate, Housing and Urban Development.

Those who have existing loans too have something to cheer. Borrowers whose loans are linked with an external benchmark, like repo rate, treasury-bills and the like can expect to see their EMIs coming down in the next three months. Loans which are linked to the marginal cost-based lending rate (MCLR) will benefit only when their bank reduces loan rates. The reset period could be six months or one year.

Further, extending of loan moratorium for another six months will be helpful in lowering the burden for those who are paying EMIs or using credit cards.

However, the interest incomes will go down for dixed deposit (FD) investors. Senior citizens who are dependent on FD interest incomes will see rates further going down. Currently, SBI’s one-year FD rates are 5.5 per cent. However, the government has extended the PM Vaya Vandana Yojana for three more years. Though the interest rate has been brought down to 7.4 per cent from 8 per cent, it is still better than FD rates.

While the central bank has extended the moratorium for three more months for term loans, it has also decided to roll over the lending/refinancing facility for MSMEs by Sidbi under TLTRO 2.0 for another 90 days. The repo rate reduction will also be applicable for MSME loans.The reduction of reverse repo will discourage banks to park money with RBI and increase lending.

“The repo rate cut will make both new and existing loans cheaper as well as accessible as the MCLR rates come down. We hope the accumulated interest at the end of the moratorium might also become lesser due to the rate reduction,” said Rajive Chawla, chairman of I am SME of India.