The Reserve Bank of India’s decision to cut policy rates is good news for prospective consumers who earlier postponed the purchase of a new house or automobile because of high rates.
V Vaidyanathan, chairman and managing director of Capital First , said “In my mind, there is no doubt that rates will come down… Banks are now offering home loans at base rate. They are not lending below base rate because they are not permitted to do so, but in a day or two, banks may reduce rates by at least 25 basis points.”
Rupa Rege Nitsure, chief economist of Bank of Baroda, said, “In broader terms, monetary policy is supportive of growth. This is substantial easing of 50 basis points, the repo and the CRR together. There is definitely scope for lending rates to come down.”
The RBI also unexpectedly reduced the cash reserve ratio (CRR), the share of deposits banks must keep with the central bank, which will infuse an additional Rs.18,000 crore into the banking system.
The Reserve Bank lowered its key policy rate for the first time in nine months, but more importantly the central bank has indicated that more cuts may be in the offing.
A 0.25 per cent cut in interest rate on Rs. 50 lakh home loans for 20 years translates into a minimum savings of Rs. 800 per month, analysts said.
A reduction in interest rates on loans will be accompanied by a reduction in deposit rates in savings. So, deposit rates on savings bank account, fixed deposits, and other term deposits are likely to fall.
Source – NDTV Profit