RBI Makes Loans Cheaper, Offers Big Relief On Interest Payments TooSat May 23 2020 / By: Rashmi
In good news for loan borrowers, the Governor of the Reserve Bank of India (RBI) announced a number of updates for the Indian economy. He announced that the RBI is going to reduce the repo rate, extend the loan moratorium, and a few other changes to give a breath of ease to common people.
Shaktikanta Das, the Governor of RBI, said that RBI has decided to reduce repo by 0.4 percent further. Right now, the repo rate is 4.4 percent, which means that it will drop down to 4 percent once the new rules are implemented.
How is it going to affect common people?
Since the year 2000, RBI has made an interest rate benchmark called repo rate. Basically, it is the interest rate at which RBI gives short term funds to PSUs and private banks. According to the banking rules, if RBI reduces its repo rate; banks will also have to reduce their interest rates on loans granted to the general public
Hence, this new reduction in the repo rate will ultimately push other banks to lower their interest rates for the loan borrowers.
Apart from the lowering of repo rate, RBI has made another announcement that's going to give common people consolation in these hard times.
In his speech, Shaktikanta Das said that the moratorium on loan EMIs and Credit cards is being extended by three months. Earlier, it was supposed to end on May 31, 2020, but now with this new update, the loan moratorium will end on August 31, 2020.
RBI ruled in April that the banks can not push customers to pay their EMIs or Credit card dues of the period starting from March 1, 2020. This move relaxed small business owners, employees, and self-employed people who were affected by the lockdown since March 25. Now, these loan borrowers have a choice of paying their EMIs and Credit card dues or to avail the moratorium option.
It was the first press conference of RBI governor after the announcement of the 20 lakh crore relief package by the central government, and he has already announced some relief for the common people. Economic pundits are speculating that we can further expect to see more of him in the future to announce similar relief packages.
Every bank has rescheduled its customers' loan repayment timeline. After this move, the banks will again have to reschedule the loan-repayment cycle as most of the borrowers are at the economic condition as they were before.
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