RBI Repo Rate: The Reserve Bank of India (RBI) can deduct 25 basis points (0.25%) in interest rates on this Friday. This decision can be taken after keeping interest rates stable for two consecutive years. This move of RBI can reduce the monthly installment (EMI) of loans like home loan, personal loan and car loans. This will benefit millions of loan customers in the country. RBI will announce the repo rate on 7 February.
Why can there be interest rate cut?
This decision of the RBI will help in increasing the consumption in the central government budget and bringing liquidity to the market. The retail inflation rate is also within the range of 6% of the RBI, this will give the central bank a chance to cut interest rates.
RBI has kept the repo rate stable at 6.5% since February 2023. There has been no change in it. Earlier in May 2020, interest rates were cut during the Kovid-19 epidemic and after that it was gradually increased to 6.5%. Now RBI wants to speed up economic growth by making RBI debt cheaper due to slow consumption. This will reduce the burden of EMI on the common people and will be less empty.
How much will common people get relief from EMI?
If a person has taken a home loan of Rs 50 lakh for 20 years at an interest rate of 8.5%. So after a cut of 0.25%, this change will happen to his EMI.
Old EMI (at 8.5% interest rate): Rs 43,059
New EMI (at 8.25% interest rate): Rs 42,452
Monthly Saving – 607 rupees
Annual Saving – Rs 7,284
Although this amount must be looking small to you, but in the long time it will prove to be a good benefit. Especially when interest rates may decrease further in future.
EMI will also decrease in car and personal loan
1. Personal Loan (Rs 5 lakh, 12% interest, 5 years period)
Old EMI: Rs 11,282
New EMI: Rs 11,149
Monthly Saving: Rs 133
Annual Saving: Rs 1,596
2. Car Loan (Rs 10 lakh, 9.5% interest, 7 years period)
Old EMI: Rs 16,659
New EMI: Rs 16,507
Monthly Saving: Rs 152
Annual Saving: Rs 1,824
All loans taking customers will not get benefit
This relief will be available only to the customers who have taken a loan at the floating interest rate. There will be no change in the EMI of those taking loans at fixed interest rate. In addition, the interest rates paid by banks depend on two things – MCLR (Marginal Cost of Lending Rate) and Spread. Although the MCLR will decrease, it will depend on the policies of the spread bank, which will not give equal benefit to every customer.
What will happen on 7 February?
RBI will announce its interest rate policy on Friday 7 February 2025. It will be important to see what the central bank will take on the interest rates. The Indian rupee has recently weakened against the dollar, which may affect the monetary policy of RBI. Most experts believe that RBI will maintain the interest rates, which can provide further relief to those taking loans in future. However, interest on saving accounts and fixed deposits (FD) can also be deducted, which can reduce the returns to those investing in FD.
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