Home Loans To Become Cheaper As RBI Cuts Rates Finally

Reserve Bank of India finally cut its main interest rate. This rate-cut by RBI will push other banks to offer home loans at lower interest rates. However the rate-cut is believed to benefit only the new applicants for home loans.

Finally the home buyers can submit their application for home loans. According to the new rates declared by RBI the interest of home loans will be lower than the existing one. Home buyers have been waiting for the rate-cut for a quite long while.

In a favoring act to the home buyers, Reserve Bank of India finally cut repo rate and cash reserve ratio. Loan cut by the Central Bank of India will have an impact on the interest rates of home loans. As the Repo rate and CRR are cut short, the subsidiary banks will be able to provide home loans at lower interest rates to the people.

Moreover the new cut rate will allow the subsidiary banks to provide loans with lower EMIs (Equated Monthly Installments). Besides the home loans, car loans and all auto loans, industrial loans, etc. will also become cheaper.

Governor of RBI D Subbarao said that the RBI’s rate- cut is expected to boost investments. In his opinion the rate- cut will keep inflation moderate. Additionally the cut will improve both liquidity and credit flow, he revealed.

In the last week of January, RBI declared a 25 bps cut in its repo rate and CRR. As per the revised rates the Apex Bank will offer loans to the subsidiary banks at 7.75% interest. The earlier interest rate was 8%.

The reduced CRR rate will leave Rs.18,000 Cr with the subsidiary banks. They will be able to lend more to the borrowers. However the experts opined that a major share of the additional fund will be given in the forms of housing loans.

Public sector bank IDBI has already announced a 0.25% interest-cut in their loans. IDBI declared that the revised rate is effective since February 1. With the revision of loans the borrowers will get loans at 10.25 % interest rate.

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