RBI extends EMI moratorium period, cuts repo rate cut – Know the impact

RBI extends EMI moratorium period, cuts repo rate cut – Know the impact

EMI moratorium period by RBI: Reserve Bank of India Governor Shaktikanta Das in his press conference today announced a cut in the repo rate by 0.4 per cent, which now stands at 4 per cent. Subsequently, the reverse repo rate was reduced to 3.35 per cent. The RBI had cut repo rate by 75 basis points in March and also announced several liquidity measures amidst the COVID-19 outbreak. Besides cutting the repo rate, the RBI has also extended the moratorium period by another three months.

Home loans
After the repo rate cut and with the cost of funds coming down for banks, borrowers will stand to gain as the EMIs on their home loan and car loan are expected to fall. If you are a borrower with a loan linked to Marginal Cost of Funds based Lending Rate (MCLR), the fall in MCLR will help you pay lower EMIs on your loan as and when their reset-period comes up. Currently (from October 1, 2019), loans, including home and auto loans, offered by banks, are linked to an external benchmark, which for most banks is the RBI repo rate.

As and when there is a revision in the repo rate, the home loan interest rate for the borrower gets revised within three months. The transmission, therefore, is expected to be faster in repo-linked home loans than on the loans linked to MCLR – an internal benchmark of banks.