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Mumbai, Jun 6: Your home and car loan EMIs are set to fall. To boost PM Narendra Modi's growth agenda, RBI has cut its benchmark lending rate to a nearly nine-year low of 5.75%. This is RBI's third repo rate cut this year. What's even matter is that RBI has indicated more such cuts in the near future. Let us now look at the impact of rate reduction on your EMIs.
Giving a stern message to the banks to pass on the benefits to bank customers, RBI Governor Shaktikanta Das said, “It's our expectation that as we go forward there will be higher transmission and then there will be faster transmission as well. This transmission will find its impact on individual consumer loans, consumer durable loans and two wheeler loans as well.”
Assuming bank follow RBI Governor's diktat, let's look at an example and see how much cash you will save per month.
KNOW IMPACT OF REPO RATE CUT ON YOUR EMI
Loan Amount: Rs 3000000
Tenure: 20 years
Current Interest Rate: 8.6 %
Current EMI: Rs 26,225
New rate of interest: 8.35 %
EMI after cut in rate: Rs 25,751
Your monthly saving = Rs 26, 225 - Rs 25,751 = Rs 474
(Example based on interest rate from SBI website for salaried class, male borrowers)
KNOW IMPACT ON REP RATE CUT ON DIFFERENT BORROWERS
1. New loan takers
RBI has postponed plan to link interest rate on loans to an external benchmark instead of the present MCLR-linkage. Thus, for those taking loans for the first time, rates will be linked to MCLR. Banks are likely to cut MCLR after repo rate cut. So you will get cheaper loan.
You will be eligible for credit subsidy under the Pradhan Mantri Awas Yojana which is 4% for middle income group - I with annual income between Rs 6 lakh and Rs 12 lakh. This subsidy is 3% for MIG -II who have annual income from Rs 12- Rs 18.
This subsidy will continue till March 31, 2020.
2. Existing borrowers
a. For those who have MCLR-linked loans
Good news is that banks are set to lower MCLR after three repo rate cuts. This will lower EMIs. However, you will get benefit only when banks reduce MCLR and after your reset date. Normally, banks offer reset date of 1 year or six months.
b) For those with loans linked to base rate/ BPLR
Such customers should start thinking on lines of switching MCLR-linked loan. As this will give you better opportunity to avail RBI rate cuts.
After April 1, 2016 all loans have to be MCLR-linked.
News24 Bureau/ Agencies