The repo rate has been reduced by 25 basis points (bps) by the Reserve Bank of India on Thursday. This has brought down the rate from 5.5% to 5.25%.
Will home loans get cheaper?
A number of state-controlled banks offer home loans at 7.35% at present. Borrowers might see their interest rates decrease to 7.1% after the cut in repo rates by the RBI. A 0.25% drop in interest rates would amount to a ₹1,440 reduction in monthly EMIs on a ₹1 crore home loan taken for 15 years, The Times of India reported.
Punjab National Bank has already reduced its Repo Linked Lending Rate (RLLR) from 8.35% to 8.10%, following the RBI revision, CNBC TV18 reported.
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What did the RBI Governor say?
RBI Governor Sanjay Malhotra said, "The MPC (Monetary Policy Committee) met on the 3rd, 4th and 5th of December to deliberate and decide on the policy repo rate. After a detailed assessment of the evolving macroeconomic conditions and the outlook, the MPC voted unanimously to reduce the policy repo rate by 25 basis points to 5.25% with immediate effect."
Governor Malhotra said that the Standing Deposit Facility (SDF) rate has been reduced to 5%, while the Marginal Standing Facility (MSF) and the bank rate have been set at 5.5%. The RBI has also maintained its neutral policy stance.
Along with the rate reduction, the RBI introduced additional liquidity steps to stabilise and support financial markets. RBI Governor Malhotra said, "The Reserve Bank has decided to conduct OMO purchases of government securities of ₹1 lakh crore and a three-year dollar rupee buy-sell swap of 5 billion US dollars this month in December to inject further durable liquidity into the system."
