Home Loan EMIs to Get Cheaper as RBI Further Cuts Repo Rate; Fee on NEFT-RTGS Transfers Also Waived off

Updated on: 05 Jan 2024 // 3 min read // #mmm news
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Bringing on further cheer to Home Loan and Car Loan borrowers, the Reserve Bank of India has reduced 25-basis point cut in the repo rate, which is a third cut in the row. The repo rate is the benchmark rate at which the central bank lends money to the banks. With the lowering of the repo rate, the banks tend to transfer the benefit of a lower rate to the end users.

The Apex bank has also proclaimed its policy stance as “accommodative” from previous “neutral” which means a rate hike is unlikely in the coming months.

Another significant announcement was scrapping up of bank fees on NEFT and RTGS transfers. The RBI has also said that it would set up a panel that will review ATM withdrawals fees levied by the banks.

Let’s review the implications of the RBI’s announcements below:

Repo rate cut: Lowest In 9 Years!

After the rate cut announced by the central bank on Thursday, the effective repo rate will be 5.75, which is the lowest benchmark lending rate in the last nine years.

The Apex bank has announced cut in the repo rate third time in the row, and the combined rate cut is 75 basis point this year. This indicates that the RBI seeks to boost spending and purchasing power of the end consumers.

RBI repo rate cut pattern in the last 1 year

Repo Rate Cut Announcement DatesRepo Rate (in %)
June 6, 20195.75
April 4, 20196.00
February 7, 20196.25
August 1, 20196.5
June 6, 20196.25

While the RBI has asked banks to transfer the benefit to the end consumers, the repo rate cut eventually may not benefit the consumers completely unless the central bank takes final nod on linking of all new floating rates to external benchmarks like the repo rate. Currently, banks may or may not pass the rate cut benefit to the consumers.

Also, the lowered MCLR rate following the repo rate cut will instantly benefit only the new Home Loan customers. The existing consumers need to wait till the reset date to change the EMI. The fixed Home Loan borrowers will not get any EMI breather with the change in the lending rates.

The largest lender of the country, the SBI has introduced first in the segment Home Loan product linked to the central bank policy rate after the MPC’s rate cut announcement. From July 1, 2019, onwards consumers can opt for

The bank has also said that it will pass on the 25 bps repo rate cut to its cash credit/ overdraft borrowers with a limit over Rs 1 Lakh.

NEFT and RTGS Transfers charges waived off

In a big move to promote digitisation of payments, the central bank has scrapped bank charges imposed on online money transfers. You can now carry out both NEFT (National Electronic Funds Transfer) and RTGS (Real Time Gross Settlement System) uninterrupted as the apex bank has asked commercial banks to shift this benefit to the customers.

This will essentially remove the barrier of transacting online as NEFT and RTGS transfers will eventually be free of cos. The RTGS mode of payment is used for large-value instant fund transfers while NEFT is used for the transfer of funds up to Rs 2 Lakh online.

New SBI RTGS and NEFT Rates

 Previous RatesIntended New Rates
  • Rs 2.5 for transfers up to Rs 10,000
  • Rs 5 for transfers up to Rs 1 Lakh
  • Rs 15 for transfers between Rs 1 Lakh to Rs 2 Lakh
  • Rs 25 for transfers more than Rs 2 Lakh
NEFTBetween Rs 25 to Rs 56, depending on transaction size and timeNone

The Future Outlook of Economy

RBI Governor Shaktikanta Das at Bi-Monthly Monetary Policy marginally lowered forecast for GDP growth for the financial year 2019-20 to 7 percent from previous 7.2 percent and increased forecast for retail inflation to 3.1 percent. In all, the RBI policy cited the concerns on the overall growth of the economy.

Also Read : Second Consecutive Repo Rate Hike by RBI