Rate reductions on Home Loans for new borrowers
You don’t need to pay any equated monthly instalments or EMIs for any loans until 30 June 2020. This will bring huge relief to all borrowers, including those who have home loans, education loans, auto loans, agricultural loans, retail and crop loans in their names.
To support the common man in the time of COVID19 crisis
The Reserve Bank of India has reduced its repo rate by a massive 75 basis points (bps). This will bring down rate of interest for borrowers, once banks pass on the policy rate cuts. The RBI allowed a deferment of repayment on all the loans. With the RBI allowing to defer loan repayment for three months, the ball is in the banks’ court to pass on the benefit to people, many of whom have been affected to due job loss and salary cuts in the outbreak of deadly Coronavirus.
This rate cut intervention by RBI has been announced after central banks across the world announced rate cuts to stave off a coronavirus-related recession.
This huge step taken by RBI is aimed at mitigating the impact of the coronavirus outbreak on businesses and employees in India. The RBI also said that moratorium on term loans and deferment of interest payment would not result in asset classification downgrade. And it will not affect the credit history of the borrower.
RBI also said all lending institutions and banks had been allowed to defer interest on working capital repayments by three months. The RBI also allowed banks to reassess the working capital cycle and said that they will not be treated as non-performing assets.
The current decisions taken by the RBI would provide a big relief to the individuals and businesses facing a big economic challenge that has arisen in due to the outbreak of coronavirus and to cover it up 21-day lockdown announced by the government.
Impact of the rate cut on borrowers
The rate cut is likely to reduce EMIs of borrowers, and also make it cheaper to take New Home loans.
Further, if you are planning to take a new home loan, then check if you can avail the benefit of credit subsidy available under the Pradhan Mantri Awas Yojana (PMAY). The benefit of interest subsidy for both the groups is available till 31 March 2020.
Also, keep in mind that when RBI starts to hike key rates, your interest rates will also go up in tandem. So external benchmark linked interest rates are likely to be more volatile than the MCLR linked rates.
Be informed that RBI has only allowed banks to allow a moratorium. Individual banks will have to allow suspension of EMIs. This means that unless you have specific approval from your bank, your EMIs will still be deducted from your account.
Get in touch with your bank to get more details on how to execute the benefits given by RBI.