RBI Repo Rate cut announced; EMI payment delay to loan rates, check top 5 takeaways

Coronavirus impact: In its bid to provide ample liquidity in the market and the respective operational banks, the Reserve Bank of India (RBI) has announced that it has ordered a Repo Rate cut by as much as 0.75 per cent to 4.4 per cent. The RBI also cut the Cash Reserve Ratio (CRR) by 1 per cent to 3 per cent. This will give around Rs 1.37 lakh crore additional money to the banks, which they can use to boost the requirements of the markets and bank customers.

Speaking on the fight against the COVID-19 virus, RBI Governor Shaktikanta Das said, there is a need to enhance liquidity in the market and provide monetary breathing space to the banks. At the same time, when there is a complete lockdown, there is a need to provide some relief to the regular repayments of the bank customers, especially term loans, home loans, etc.

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Hailing the RBI's decision Kaushal Agarwal, Chairman & Director at The Guardians Real Estate Advisory said, "The steep cut in the repo & reverse repo rates by 75 and 90 basis points is in-line with announcements made by Central Banks across the world, to mitigate the impact of the Coronavirus. The 3 month moratorium for borrowers is a huge relief for individuals. At a time when there is a looming concern of the economy slipping into a recession, the announcements by the finance minister, yesterday and the RBI today depicts the responsiveness of our financial institutions." He said that the relatively higher reduction in the reverse repo and the CRR is bound to push banks to look at increased lending, thereby ensuring attractive lending rates. 

"We believe that with the Repo now, at 4.40 per cent the banks will finally be passing the benefits of the current & previous rate cuts to the customers. This will reduce the borrowing cost for the home-seeker significantly and have a positive impact on Real Estate. The commitment by the RBI Governor to tackle the evolving situation by making use of the many arsenals at its disposal is very reassuring," said Kaushal.

Here are the top 5 key takeaways of RBI's MPC meeting decision:

1) Relaxation in term loan repayment for three months is the major takeaway that bank customers may get from the latest RBI decision to cut rates and CRR. If that happens, bank customers who are not able to pay their auto loan, home loan, personal loan EMIs will not see their CIBIL score getting affected.

2) CRR reduced by 1 per cent to 3 per cent. It will funnel an additional Rs 1.37 lakh crore into the Indian banks that would enable them to continue their commitments towards the markets and their customers.

3) Repo Rate cut by 0.75 per cent is going to bring more liquidity into the market. From now onwards, banks will be able to cut down interest rates on the various bank loans, especially term loans.

4] Those who are planning to buy a home, can expect even lower EMIs as the home loans are expected to get cheaper, especially after the Repo Linked Lending System in place; and

5] Bank savings and fixed deposit interest may also go down.