Kolkata: India is going through high interest rates for a long time. The Reserve Bank of India (RBI) Monetary Policy Committee is meeting now and it is widely expected that the domestic rate-setting panel would cut policy rate (possibly the Repo Rate) by 25 basis points to inject growth in the economy. Analysts have pointed out that the FM has already announced income tax reliefs to increase disposable income in the pockets of a large number of taxpayers, hoping it would result in higher levels of consumption.
If the RBI MPC now cuts interest rate, it will provide further tailwind to private consumption, which is the elixir of India’s economy. “We expect a 25-basis point rate cut in Feb 25 policy. Cumulative rate cut over the cycle could be at least 75 basis points, with two successive rate cuts over February and April 2025. With an intervening gap in June 2025, the second round of rate cuts could start from October 2025,” a State Bank of India Research Report has mentioned. But the moot point now is what will happen to your EMIs once the RBI announces the widely-expected rate cut decision.
Repo rate cut can lead to lower EMIs
To put it simply, an cut in policy rates is likely to impact your EMIs. Be it home loans or personal loans, car loans or education loans, will become cheaper when policy rates (read Repo Rate) are reduced since interest rates of all loans are tied to the Repo Rate by banks. Since almost all loans are approved on a floating rate mode these days, interest rates will fall — leading to reduction in EMIs — for almost all borrowers.
Banks can take about a month to cut rates on loans
Though every bank takes its own time to transmit the benefit to the customers — both present and future — private banking executives told News9live that a ballpark time period of about a month is referred to for banks to pass on the benefits. In other words, the lower EMIs or interest rates on loans can be expected to kick in after 4/5 week from the RBI’s decision to cut rates.
There is also an opportunity for those who are considering to take loans for buying cars, homes, or taking personal loans for just about anything, or even education loans. Once the policy rates fall, it is likely that all banks will reduce interest rates they charge on loans. It will make it easy for the customer to apply for loans at a reduced EMI.
A State Bank of India Research Report has mentioned that they expect a 25 basis point rate cut in the RBI Monetary Policy Committee meeting that has begun on February 4. While the implication is immense for the broader economy, it is no less significant for the common who might be paying EMIs on ongoing loans or are contemplating taking one. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
