For Quick Alerts
ALLOW NOTIFICATIONS  
For Daily Alerts

    How RBI Rate Cut Impacts Borrowers And Depositors?

    |

    The RBI today cut the repo rate by 25 basis points, with it the new key rates stand at 6.0%. The decrease in repo rate is justified given the low economic growth as well as inflation rate which has remained well under check.

    How RBI Rate Cut Impacts Borrowers And Depositors?
     

    Impact on depositors

    And after the cut, depositors are likely to be less impacted as there is already a lag in deposits growth in contrast to credit growth. The depositors who have already booked in their deposits at higher rate will continue to fetch higher rate of return till its maturity.
    Also, going ahead banks may look to cut down on the interest rates on deposits but not in the same proportion as the repo rate cut.

    SBI also has pegged linking its savings deposits accounts with deposits of more than Rs. 1 lakh to repo rate beginning May 1, 2019.

    It is worth mentioning that RBI in its MPC meet today also deferred its earlier decision to peg loan rates to external benchmark such as repo rate as against current MCLR rate for better transmission of policy rates.

    Impact on borrowers

    The borrowers may have the view that RBI's rate cut will mean reduction in EMIs for them, but the move is likely to take some time as the earlier decision to enable better policy transmission has also been deferred by the apex bank.

    Also, another important pointer here is that most retail loans as of now are pegged to MCLR rates and as the cost of funds for banks also includes deposit rates and these rates do not come down in proportion to repo rate, MCLR rates and hence the lending rates will be reduced only marginally.

    Further, a reduction in EMI for borrowers is effected only with the next reset date as in the case of a home loan even if the bank reduces the marginal cost of funds based lending rate.

    GoodReturns.in

    Read more about: rbi repo rate loan emi
    Story first published: Thursday, April 4, 2019, 13:40 [IST]
    Company Search
    Enter the first few characters of the company's name or the NSE symbol or BSE code and click 'Go'

    Find IFSC

    Get Latest News alerts from Goodreturns

    Notification Settings X
    Time Settings
    Done
    Clear Notification X
    Do you want to clear all the notifications from your inbox?
    Settings X
    We use cookies to ensure that we give you the best experience on our website. This includes cookies from third party social media websites and ad networks. Such third party cookies may track your use on Goodreturns sites for better rendering. Our partners use cookies to ensure we show you advertising that is relevant to you. If you continue without changing your settings, we'll assume that you are happy to receive all cookies on Goodreturns website. However, you can change your cookie settings at any time. Learn more