Policy effect and insurance cover
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The Reserve Bank’s credit policy should bring cheer for the home loan borrowers, says SRIKALA BHASHYAM
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Normally, the Reserve Bank’s credit policy is an event eagerly looked forward to by the bankers and market men. It has gained more importance in the light of the current interest scenario and inflation. Now, if you are wondering why we are discussing about RBI’s credit policy, it is not without reason.
The credit policy has a lot of bearing on the interest rate scenario and hence is an important event for those who are sitting on home loans and more so for those who are planning to take a loan. The latest credit policy, announced on Tuesday (July 31), should bring a sigh of relief for both communities.
Bank rate untouched
The RBI left the bank rate untouched and increased the cash reserve ratio by 50 basis points. Now, this rate stands at 7 per cent, which means banks have to set aside Rs. 7 for every Rs.100 income earned. Earlier, this stood at 6.5 per cent.
By increasing the above rate, RBI has actually reduced the money supply in the system to the tune of Rs.15,000 crore. Technically speaking, this should result in a higher interest as there is a shortage of money.
However, the good news for the borrower is that rates are unlikely to go up as there is enough liquidity in the system.
Bankers have already indicated that they may not go in for rate hike as it has affected their lending in the last quarter. Most banks have upped their lending rates, both of home loans and personal loans, and now offer home loans in the region of 10.5-12 per cent.
This is 2-3 per cent higher than rates that prevailed around two years ago. This has either increased the tenure of home loans or has pushed up the monthly instalments. This has also slowed down fresh borrowing and in some cases defaults on payments have started creeping in.
In such a scenario, banks are unlikely to tamper with their lending rate and are likely to stick to the existing rates. That should be good news for property buyers who have been exposed to a lot of uncertainties in recent months.
Whatever be the loan option, don’t forget to take an insurance cover.
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