Reserve Bank of India (RBI), India’s Central Bank has once again cut the repo rate. It has done that to mitigate the impact of the Novel Coronavirus (COVID-19) on the economy. The slashing of repo rate by RBI is by far their lowest since 2000.
RBI has also provided immediate relief to millions of loan users. It has done that by extending the moratorium on EMIs by a period of 3 months. Now, you don’t need to pay your loan EMIs till 31 August 2020. The decision to extend the repayments of loans to 3 months from 1 June 2020 to 31 August 2020 was again to soften the impact of COVID-19.
RBI believes that the impact of the Novel Coronavirus is sterner than what was predicted. It also said the growth of the GDP is expected to be negative during 2020-2021.
COVID-19 is taking a toll on the Indian economy
The outbreak of the Novel Coronavirus Pandemic (COVID-19) has affected one and all. And India is not an exception. With infection cases doubling almost in 1-2 days, the country is under lockdown by the Central Government to control the spread. The current COVID-19 situation has crippled even the economies of developed countries. And India is not an exception!
Our honourable Prime Minister of India Shri. Narendra Modi had announced the first stage of the lockdown of 21 days on 24th March 2020. But now we are already nearing lockdown 5.0 and may see the 5th phase with more relaxations.
Ever since then, the situation has become bad to worse. It is because the India economy has started to feel the heat of Coronavirus Lockdown.
India’s Central Bank, the Reserve Bank of India (RBI) has been monitoring the effects of the Novel Coronavirus on the economy.
RBI slashes repo rate to 4%
In the wake of the uneventful situations, RBI recently announced measures in a bid to ensure liquidity in the market. On 22nd May 2020, Mr Shaktikanta Das, the RBI Governor, has announced that the Central Bank has reduced the repo rate by 40 basis point. Now, Reserve Bank of India will lend money to Indian banks at 4% repo rate.
“The short-term lending rate is at 4%, and it is down from 4.4%. We have also reduced the reverse repo rate by 40 basis points. It now stands at 3.35%. There is also a 3-months moratorium period that we have extended to 31 August 2020. We have come with these measures to combat COVID-19 impact”. Shaktikanta Das, the Governor of the Reserve Bank of India, was recently quipped as saying.
All these decisions by RBI were taken in a video conference by the Monetary Policy Committee (MPC).
Even though the lockdown may be lifted on 31 May 2020, economic activities will remain low in Q2. It may be due to social distancing and shortage of labour due to migrants moving homes. It is RBI’s take on the Indian economy.
Reserve Bank of India is hoping that the Q3 may see some recovery and we may see momentum in Q4. It is when the RBI sees supply lines restored with a gradual increase in demands.
On the other hand, the Finance Minister, Nirmala Sitharaman recently announced Rs.20 lakh crore Economic Stimulus Package. It was done to rescue the economy from COVID-19 impact further. She also extended the PMAY’s CLSS scheme for applicants earning between Rs.6-18 lakhs/year to 31 March 2021.
Home loans are all set to become affordable
With repo rates being cut, you may also see home loan rates being cut. It means that it is a good time to move into your new home. The lower home loan interest rates mean you will be able to pay reduced EMIs.
Many banks have already passed on the benefit to customers while some have not. But sooner or later, they may do that by following the norms of competition in the market.
So if you have been thinking to make your dream home come true then this is the right time. You can also avail Home Loan Interest Subsidy under Pradhan Mantri Awas Yojana (PMAY) scheme.
Check out your Pradhan Mantri Awas Yojana eligibility using our PMAY Calculator.