Although we realise that signs are not conducive for a rate cut, one would still hope for a slash that would help spur further economic growth. Even the Finance Minister, Arun Jaitley, is seemingly looking at this prospect, as he said his expectation “was similar to that of the industry.” That would still leave us guessing on the outcome. In case of a status quo from the RBI side, it would only mean it is a clear message to the government to continue work on stabilising the economy.
Retail inflation has marginally eased (down from 5.25% to 4.87%), but the party spoiler would be the crude oil price which has jumped to over $68 per barrel which is not good news at all.
Petrol and diesel prices have been hiked three times in quick succession and another couple of dollars’ rise in international oil prices would bring back the domestic retail prices to old rates which would be such a dangerous aspect for the economy as a whole.
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After the recent two rate cuts with the Governor’s stern warning, most banks brought their home loan lending rates to around 10%, but the same is yet to cheer the borrowers. The demand on retail loan is subdued and a revival is in store if RBI turns dovish and cuts the rate by at least 0.25%. It sends a positive signal to the lenders since they were not galvanised enough to pass on the benefit to the end users.
A third cut in less than six months would surely make banks and HFIs more comfortable and they would happily start passing on the benefit. A sub 10% rate of interest would surely bring smiles on the faces of the existing as well as aspiring borrowers.
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Interested customers can negotiate hard with lenders to get their deals. Choosing floating rate option is the best in the current situation.