Reserve Bank of India’s monetary policy committee (MPC) maintained the status quo on key policy rates. Read on to find out what it means.
Reserve Bank of India’s monetary policy committee (MPC) maintained the status quo on key policy rates and cited softening inflation during the months of February-March as a key reason for not disturbing the rate.
What It Means For The Borrowers?
This is probably the best time for a borrower to seek a loan as experts believe there may be a hike in interest rate in the near future. They believe that the trade war between China and US could put immense pressure on the export and domestic currency resulting in a rate hike. Another factor which could result in a rate hike is high crude prices, which have shown no sign of a downward slide. Besides, food and vegetable prices tend to escalate in summers, resulting in a rise in inflation which mounts pressure on the RBI to hike interest rates.
Hence, with chances of an imminent rate hike in the near future, this could be an ideal time to avail a Home Loan, Car Loan or any other purpose. Besides, even if there is no rate hike during the next policy meet in June the chances of a rate cut appear fairly thin as well.
The real estate market at present is trying to overcome a slowdown and offering lucrative discounts on properties depending on the location and brand. So, you can make up your mind about the kind of property you can buy as interest rates are still attractive. Similarly, if you are willing to buy a car on loan, then you can go for it now.
There is a positive news too for the existing borrowers. As the MET department predicts a normal monsoon this year, it may keep inflation under check and also cut down chances of an interest rate hike.
Meanwhile, despite RBI’s status quo some banks have already started raising their interest rate on loans due to the rising fund cost. Previously, banks used to offer home loans based on only the 1-year MCLR but now many banks have begun doing so on a 6-month MCLR, even for a home loan which is a long-term product. This may be an indication that banks also sense interest rates will gradually increase from this level. If the loan is linked to the shorter MCLR rate, it’ll lead to a quicker transmission of rate changes from the RBI to the customer.
Things To Keep In Mind
If you are looking to apply for a loan, it is better to opt for a longer duration MCLR. If you want to put your money in a Bank FD, avoid long duration products as deposit rate would also revise upward once banks start increasing the lending rate.
BankBazaar.com is a leading online marketplace in India that helps consumers compare and apply for Credit Card, Personal Loan, Home Loan, Car Loan, and insurance.