Home loans to get cheaper as RBI cuts repo rate

New Delhi : Interest on home loans is all set to fall as the new RBI governor Urjit Patel has announced a cut of 25 bps in repo rates. 

Giving a thumping start to his new role, Urjit Patel tried to woo retail buyers while he kept the Cash Reserve Ratio (CRR) unchanged.

With his latest move, the repo rate has been changed from 6.50% to 6.25%, this will allow buyers to save nearly 800 rupees a month for a home loan of Rs 50 lakhs.

Repo rate definition

Repo rate is the rate of interest for which commercial banks can borrow money from Central Bank of India in the event of any shortfall of funds. 

Repo rate effect on loans

The reduction in repo rates allows banks to borrow money at cheaper interest rates, which they end up in benefitting their consumers by decreasing interest on home and auto loans.

Highlights:

# New RBI Governor Urjit Patel in his first move reduced repo rates by 25 bps

# The new repo rate have changed from 6.50% to 6.25%

# Interest on home and auto loans likely to fall with this

# Urjit Patel replaced Raghuram Rajan after his tenure ended as RBI chief.