Loans to get cheaper as RBI cuts repo rate by 25 basis points

New Delhi : Home loans, Car loans and even personal loans are set to get cheaper as the Reserve Bank of India has slashed its repo rate by 25 basis points to 6% from 6.25% with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% and to support growth.

This is the second time the Central Bank has slashed repo rate in 2019. In 2018, the central bank had raised rates by 50 bps to 6.5% which in 2019 has been cut and repo rate is back at 6%.

What is Repo rate?

Repo rate, the key policy rate, is the rate at which the central bank lends money to commercial banks. The reverse repo rate stands adjusted to 5.75%, and the marginal standing facility rate and the Bank Rate to 6.25%.

How decrease in Repo rate will benefit you?

If you are planning to take a loan either for a home, car or personal use then the interest rates will be a little less as compared to earlier.

If you are an existing borrower on floating rate you will have to wait for the reset clause to kick in. For instance, if your have a January reset clause on your loan, the rate cut will have no immediate impact. If you are a depositor, you can expect a fall in your fixed deposit rate.