The central bank tweaked the retail inflation range to 4.8-4.9 per cent in the first half of 2018-19, and 4.7 per cent in the second half.
It makes sense to shift to a home loan provider offering a lower interest rate or make occasional prepayments by using bonuses or other windfalls, says Sanjay Kumar Singh.
The final guidelines to link the interest rate to external benchmarks will be issued by the end of this month
Here's how the move will affect the banks' customers.
Senior bankers are trying to impress upon the central bank that the shift to external benchmark-linked lending be postponed to April 1, 2020.
Eighteen months after the economy was battered by the Covid-induced lockdown, employment has not recovered to its pre-pandemic levels, points out Mahesh Vyas.
A teaser loan is one where the lender offers a slightly lower rate in the initial years and then charges higher rates in later years.
Benchmark rate for new loans to be lower by 80-90 bps from Friday; move could increase competition but hit commercial papers.
Any revision in loan rates would be visible next month.
With this lending rate reduction, the bank has lowered 40 bps so far this fiscal year in five successive rate cuts beginning April.
With the 115 bps reduction in repo rate beginning February, banks have already transmitted 72 bps to the customers on fresh loans and some large banks have transmitted as much as 85 basis points.
'This is for the first time home loan rates have dropped below 7 per cent,' notes Tamal Bandyopadhyay.
The Rs 20,000 crore is in addition to Rs 10,000 crore support announced earlier by the housing sector regulator NHB.
Bankers and economists agree rates will soften, though the quantum would depend on banks' asset-liability profile
Linking all new floating rate loans to an external benchmark won't impact existing borrowers, so customers who have taken long-term home loans recently should watch things carefully, say Joydeep Ghosh and Sanjay Kumar Singh.
12 out of 21 public sector banks reported declines in their loan books in the last financial year against seven such banks in 2015-16 and none in 2013-14.
If the interest rate on bank deposits is linked to any external benchmark, it would jeopardise the banks' fund-raising ability. Interest rates on small savings schemes are likely to be reduced very shortly, to maintain parity. All these steps would indeed affect retired people, and particularly those dependent on interest income, says Arindam Gupta.
By evaluating their loan rate against the best available every year, borrowers can achieve considerable savings over the entire tenor, suggests Sanjay Kumar Singh.
The move will to a large extent speed up the monetary transmission process--which is banks passing on the rate cuts that the Reserve Bank announces to their borrowers without much delays--something that has been missing all these while and something that the RBI has been unhappy with.
Seeking to dispel possible notions of the RBI not having done enough by opting for a pause for the second consecutive time, Das said the RBI has a wide dashboard of instruments beyond rates that can be deployed.
The bank will give 3.25 per cent interest on savings bank deposits with a balance exceeding Rs 100,000. At present, the interest rate is 3.5 per cent.
Loan rates will change at the next reset, while deposit rates will continue till maturity.
Inflation in food articles, fuel and power contracted in July.
While there are several instruments in the RBI's disposal, the most effective one for infusing durable liquidity is bond purchase from the secondary market
As yields on 10-year government bonds rose from 6.65% in April 2017 to around 7.50% now, liquidity pressures have increased the cost of funds for housing finance companies.
It's not necessary to use only external benchmarks, there are multiple avenues to meet the requirement that the RBI wants, the bank said.
Currently, banks follow system of internal benchmarks, including Prime Lending Rate, Benchmark Prime Lending Rate, Base rate and Marginal Cost of Funds based Lending Rate.
"We believe in the coming months of September and October, the manufacturing growth is likely to remain flat and IIP growth may even continue to remain in the negative territory," SBI Research said in its Ecowrap Report.
Most borrowers may not be aware, but quite a few banks already offer external benchmark linked home loans to favoured borrowers, says Harsh Roongta.
With both Boeing and Airbus pitching for the medium capacity long-range aircraft order worth over $1.5 billion, the Air-India board would meet on Saturday to finalise its decision on buying 10 aircraft with options for seven more.
The economists, who were surveyed, also felt it will take time for banks to make any further reduction in deposit rates
To spur war among lenders to grab existing loans
'The effect will be seen two-three quarters down the line.'
While lending rates have been jacked up on an average of 5-10 bps by private sector lenders like HDFC Bank, Axis Bank, Kotak Mahindra Bank and Yes Bank since January, almost all the PSBs have been increasing their bulk deposit rates in the range of 15 bps to 125 bps.
Banks and insurers are beginning to reward customers who show exemplary conduct with lower prices and penalise those who behave poorly by imposing higher costs.
With the revised interest rates, the one-year fixed deposit will attract an interest rate of 6.75 per cent as against the 7 per cent earlier
Move comes in view of big debt overhang in two sectors; companies unwilling.
Move comes in view of big debt overhang in two sectors; companies unwilling.
Before buying property, please carefully study the agreement with the builder, advises Sanjay Kumar Singh.
© 2026 Rediff.com - Investor Information - Advertise with us - Disclaimer - Privacy Policy - Sitemap - Feedback - About us - Terms of use - Grievances