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Good news: RBI rate cut to bring down EMI on home loans

IANS  |  Mumbai 

The lowering of key lending rates by the of India (RBI) on Thursday has come as a pleasant surprise for homebuyers as it can lead to a monthly saving of about Rs 800 in the EMI on a home loan of Rs 50 lakh for 20 years.

The RBI, in its (MPC) meeting, has reduced its key lending rate to commercial banks by 25 basis points to 6.25 per cent. It came as a welcome surprise as the stance of the was "calibrated tightening", which has now been turned to "neutral".

At the current interest rate of 8.45 per cent for home loan, a person with a loan amount of Rs 50 lakh for a tenure of 20 years pays Rs 43,233 per month towards EMI. However, with the cut, he will now have to pay only Rs 42,440, a saving of Rs 793.

The RBI move, designed to ease the liquidity crunch, comes as a boost for the economy in an election year. The central has also adjusted the reverse repo rate to 6 per cent, and the marginal standing facility (MSF) rate and the to 6.5 per cent.

The RBI decision, in its final policy review of the fiscal, was guided by its "assessment of the evolving macroeconomic situation" wherein headline inflation was projected to soften further and the economy's growth impulses had moderated.

"Investment activity is recovering... but the need is to strengthen private investment activity and buttress private consumption," RBI told reporters after the meeting.

It is vital for the RBI to "act in a timely manner" to support growth given that inflation continues to remain benign and investment demand has decelerated, Das added.

Though the central bank has reduced its lending rate to commercial banks, transmission of policy rates has always been a concern. On several occasions, banks have failed to transfer the benefits of lower interest rate to customers.

Even the RBI has lamented the problem in the current system and it will be calling a meeting with the chiefs of banks within the next two to three weeks to address this.

Thursday's monetary policy was preceded by the government's Interim Budget presented on February 1 showering largesse across large sectors such as agriculture, housing and the informal one, and containing proposals of tax cuts that would benefit the middle class.

--IANS

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(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, February 07 2019. 17:30 IST
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