Spoiler Alert: Know why RBI’s repo rate cut will not impact your home, auto loan EMIs
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The Reserve bank of India has slashed the repo rates by 25 basis points. And no doubt that banks have followed suit. But can we expect our “No. The base rate cuts by the banks are just for the sake of it. They will not reduce the rate of interest substantially since banks have their own economics,” said
He added that if the banks reduce the rate of interest on loans by a considerable basis points, it will severely impact the fundamentals of the banks. “If they reduce the interest rates on credit, it will be at the cost interest offered on deposits to the consumers,” explained Venkatchalam.
Naveen Kukreja, managing director of
Venkatachalam attributed the reluctance to cut interest rates to the weak financials of the banks in the past few years. It should be noted that in the last few years, the provisions for Non Performing Assets (NPAs) have been consistently increasing. Most banks have converted their NPAs into Corporate Debt Restructuring (CDRs) in a bid to hide their rising numbers of NPAs.
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However, banks such as Allahabad Bank and the country’s largest state-run bank State Bank of India have cut their interest rates by 30 bps and 15 bps respectively. “If
Interestingly, it seems difficult for the apex bank to slash rates in the future after it downgraded monsoon forecast. It should be noted that in recent times, the crude oil prices to have gone up. While untimely monsoon have damaged crop production across the country, El Nino effect on the monsoon this year could result in retail prices of food commodities to spike considerably, which in turn could result in inflation surging.
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