Those wanting to own a house or buy a new car can start thinking about it now as the Reserve Bank of India, after nearly three years, has signalled an interest rate cut, making clear that loans will come cheaper in the coming days.
Banks may take some time to bring down their interest rates on loans.
Even a 0.25 drop in home loan rates will mean saving around Rs 300-500 on an EMI. And borrowers have another reason to cheer as the apex bank has abolished the pre-payment penalty on home loans, making it easier for the customer to move to other banks.
South Indian Bank executive director Abraham Thariyan says the indication is clear from the RBI’s side that loan rates will come down. The bank committee will meet soon to take a decision on the level of any cut in rate.
Other bankers such as Catholic Syrian Bank managing director V.P. Iswardas, Dhanlaxmi Bank managing director P.G. Jayakumar and Federal Bank executive director Abraham Chacko said that it will take some time to decide the rates since deposit rates were also high and would have to be pared. But, certainly, the three-year-long cycle that has seen repo rates increased 13 times, has been broken and rates are certainly set to come down.
John Thomas, secretary of the Kochi chapter of the Confederation of Real Estate Developers Association of India (Credai) while welcoming the RBI decision, says, “Banks need to reciprocate by bringing down the interest rate. Even if a 0.5 per cent cut in interest rate is effected, it will work out to be a saving of Rs 3.5 lakh for an average investor in 25 years. It will be a definite boost to the industry.”
Automobile dealers, however, are not very enthused as they feel that interest cuts alone will not boost vehicle sales.
Popular Automobiles managing director John K. Paul says that on an average the taxes under different heads — road, sales and excise — have gone up by 4.5 per cent and a meagre cut in taxes will not be sufficient incentive to boost sales. “But the message is clear and in another six months the industry should start looking better,” he said.
Kerala Chamber of Commerce and Industry chairman K. N. Marzook welcomed the RBI decision and said that commercial banks should reciprocate.