RBI slashes the policy rates-how it shall affect you?

In the wake of dwindling GDP growth, RBI had no option but to slash the policy rates and it did the same.

RBI cut the Repo Rate (the rate at which RBI lends to banks) by 50 basis points to 8%.

As the difference between Repo Rate and Reverse Repo Rate (rate at which banks park their funds with the RBI) is fixed as 100 basis points, Reverse Repo Rate too was reduced to 7%.

RBI left the CRR (the fixed proportion of the deposit which banks needs to deposit with the RBI) untouched at 4.75 %.

This respite has come after 13 consecutive policy rate hikes by the RBI since March 2010. Earlier this year, RBI had already cut the CRR by 125 basis points to ease the liquidity position in the system.

How policy rates slashing affect you?

(1) This move shall improve the liquidity position in the economy and as banks shall now get loans at relatively cheaper rates, they are supposed to lower the loan rates on consumer loans.

So home loans, auto loans and other various other loans might become cheaper by about 50 basis points. This means lesser EMIs for the loan subscribers.

(2) When banks shall now get loans at cheaper rates from the RBI, they shall cut the deposit rates. This means interest rates on RD (Recurring Deposits) and FD (Fixed Deposits).

What u should do?

If you want to do investment in FD or RD, do it as earliest as possible to avail higher rates on your time deposits as banks might reduce the interest rate of deposits.

If you want to avail any loans better wait for some time to bargain at attractive offers from the financial institutions.

Now a day’s many loans charge fixed rates for initial years and floating rates in subsequent years, it is always better to avail loans with lower fixed interest rate.