Repo rate is the rate at which RBI lends to its clients generally against government securities. Reduction in repo rate helps the commercial banks to get money at a cheaper rate
New Delhi: The RBI has decreased repo rate by 0.25% soon after the Modi government came to power with a landslide mandate in Lok Sabha 2019 elections. The move has come as a blessing for those who have availed home loans.
For those who have availed a home loan up to Rs 20 lakh, there will be a monthly savings of Rs 316, for home loans of Rs 30 lakhs the saving will be Rs 474 per month.
While the saving will go up to Rs 797 per month for a home loan of Rs 50 lakhs. This is because the interest rate drops after a repo rate if the bank passes the benefit. For instance, the earlier interest rate for home loans of Rs 30 lakh was 8.6% and the new interest rate has dropped to 8.35%.
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This move has come as a huge breather to the middle class who is the backbone for an economic boom. In India, the middle class has been an ardent supporter of Modi.
What is the repo rate?
Repo rate is the rate at which RBI lends to its clients generally against government securities. Reduction in repo rate helps the commercial banks to get money at a cheaper rate and increase in repo rate discourages the commercial banks to get money as the rate increases and becomes expensive. Price stability is one of its prime targets. But for a consumer, a higher repo rate means higher bank interest rates and a lower repo rate means the opposite.
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Last Updated Jun 6, 2019, 12:30 PM IST