RBI Reduced Repo Rates : Interest Rates of loan Reduced 2019

On Thursday, the RBI reduced the repo rate by 25 basis points as expected. This year RBI did this for the second time. Although despite declining inflation and economic growth, he did not give any concrete indication of his upcoming move. RBI governor Das has indicated that in view of the purchase of bonds in record quantities and new dollar-rupay swap deals for $ 10 billion, it may be because there are not many measures to increase the cash in the system. Bond shopping and swap deals are currently seeing adequate availability of cash.

RBI Recently Reduced Repo Rates Second Time In this year !

rapo rates

Before the Lok Sabha elections, the Reserve Bank of India has given great relief to the common people. In fact, the central bank has reduced the repo rate 25 basis points in the first monetary policy review meeting of 2019-20. After the RBI decision, it is almost certain that the bank will cut interest rates on bringing home and auto.

 

interest rate reduction

The reduction in interest rates meant that the common people would get new loans cheaply. Apart from this, the EMI that runs on your home or auto loan will also be cheaper. In this case, let’s understand that the reduction in interest rate on EMI will give you how much relief.

 

rapo rates rbi

If banks reduce interest rates by 0.25 percent, like the repo rate cut of the RBI, then your every month’s home loan will reduce to EMI 397 rupees. This calculation has been done based on the loan rates of the country’s largest bank SBI.

 

Actually, SBI currently has 8.70 percent interest rate on home loan. After RBI’s decision, if SBI cuts the interest rate by 0.25%, then the new interest rate on home loan will be 8.45%.

Before Repo Rates Reduction 

Loan Interest Rate Tenor EMI Total Interest
25 lakhs 8.70% 20 years 22013 Rs 2,78,3136

After Repo Rates Reduction

Loan Interest Rate Tenor EMI Total Interest
25 lakhs 8.45% 20 years 21616 Rs 2,687,967.20

This means that if new interest rates apply, EMI of every month will reduce by Rs 397.

 

Why banks Will be in pressure to reduce interest rates ?

In fact, due to lower repo rates, banks get affordable funding from RBI. In such a situation, banks have the pressure to give customers the benefit of this. After this, banks have the option of offering other loans including home loans, car loans at lower interest rates.

  • The governor said that considering the relative real interest rates of about 3% and the tenderness in inflation, there is scope for rate cuts, although it could not be done before the next general elections because adverse impact of the fiscal situation in the days after the election. There is a possibility of falling.
  • Das said, ‘The output gap remained negative. The country’s economy is facing challenges, especially on the global front. He said, ‘Private investment is sluggish. It needs to be strengthened by strengthening the country’s economic growth. There is a need to keep an eye on fiscal position at the government level. ‘
  • The Government welcomed the decision of the RBI and said that this will help in growth and growth. Finance Secretary Subhash Chandra Garg said, “According to RBI estimates, there is a possibility of inflation going up and the rate cut of 25 basis points is completely reasonable. This should help in maintaining the growth rate of the country at 7.2-7.3 per cent in the year 2020.
  • The repo rate was reduced from 6.25 percent to 6 percent. At this rate, RBI lends to banks. Cash reserve ratio has not been changed. This is part of the deposits of banks, which they essentially have to keep with the RBI. RBI has not changed the neutral approach of monetary policy.
  • Marketers are disappointed due to the lack of encouraging statements from the RBI and the government’s rising borrowing. The Sensex fell 0.49 percent to 38684.72, while the NSE Nifty dropped 0.39 percent to 11,598.
  • The world’s other central bank is also cutting interest rates and softening its stand on liquidity between sluggish economic growth. Estimates of reducing the repo rate of 25 basis points in ET poll made between 26 market participants.
  • GDP growth projection for the financial year 2020 was reduced to 7.2 percent. In February, the RBI had given an estimate of 7.4 percent. In the second half of the current financial year, retail inflation was estimated to be 3.5-3.8%. In the first half it can be 2.9-3%.

ICICI Bank’s Global Markets Head B Prasanna said, “Apart from bringing down the trajectory of the consumer price index, significantly lowering the estimation of inflation and decreasing the economic growth forecast, the Monetary Policy Committee has given more scope for it. Provide support to growth. ‘ He said, “With this, the RBI could soften its position, but it did not happen.”

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