The cut in CRR and repo rates is good news for borrowers, especially housing loan customers. A look by BALAJI RAO.
The RBI Governor is still not happy about the inflation levels, and feels this is not a comfortable time to announce key rate reductions. But the RBI has not completely disappointed the market. It has cut the CRR and repo rates that will ease the liquidity crunch in the banking system.
The RBI continues to make more funds available to the banks, only touching upon CRR and repo so that lending activity will improve and banks can access cheaper funds while borrowing from the RBI.
The repo rate has been reduced from eight per cent to 7.75 and the CRR stands reduced to four from 4.25 per cent.
The reduction in CRR brings in huge liquidity to the banks. This can be used to lend at a cheaper cost, which is good news for borrowers, especially housing loan customers.
Repo is a term used in financial markets where the banks are allowed to borrow from the RBI when they face a shortage of funds. A reduction in repo rate means banks can borrow funds at a cheaper cost and pass on such benefits to borrowers.
You can now get home loans at cheaper rates
The pace of home purchases is set increase