Housing Loan EMIs set to fall: NHB Reduces Rate to 9.75 %

IDBI Bank, RBS to Cut Base Rates, Others to follow Suit..!

New and old home loan borrowers are going to see a reduction in their equated monthly instalments (EMIs) with banks saying they would reduce lending rates following the Reserve Bank of India (RBI) lowering its key policy rate for the first time in 9 months.

IDBI Bank, Royal Bank of Scotland (RBS) were the first to announce a cut in their base rate on just hours after RBI cut the cash reserve ratio (CRR) and the repo rate by 0.25% in its third quarter review of monetary policy.

CRR is the share of deposits banks have to keep with the central bank RBI.

Repo rate is the rate at which banks borrow money from RBI.

An increase or / decrease in repo impacts the interest rate on (home) loans, mortgages and deposits.

RBI's announcement will reduce the cost of home loan, auto loan and corporate loans, and boost activity in the Indian economy.

IDBI Bank in a press release said that all loans, linked to base rate / benchmark prime lending rate (BPLR), will become cheaper following a 0.25% reduction in the bank's base rate to 10.25% with effect from February 1, 2013.

Similarly, the RBS announced a 0.75% cut in its base lending rate to 9 % from 9.75 %.

The base rate is the benchmark to which all loan rates are linked.

Mr. Pratip Chaudhuri, Chairman, State Bank of India (SBI), said,  The SBI bank will be getting Rs. 300 crore relief from the CRR cut, and it would be passing the benefit to its customers. The bank's asset liability committee (ALCO) would be meeting on Wednesday to take a call on reducing lending rates. SBI would do full monetary policy transmission & reduce cost of capital“

Mr. K . R Kamath, CMD, Punjab National Bank (PNB), said, “There is a case for monetary policy transmission. All along people were waiting for a rate cut. The CRR cut will bring income to banks and improve our earning. However, we need to study the impact on our net interest margins.”

Ms. Chanda Kochhar, MD and CEO, ICICI Bank, said, ''There would be a transmission of the monetary policy with a fall in lending rates. While the rate cut signals a monetary policy stance that is more supportive of growth, the CRR cut complements the same by seeking to address liquidity conditions and will facilitate transmission of the monetary policy stance into lending rates.”

Mr. Aditya Puri, MD, HDFC Bank, said, “Given that you have had both the CRR cut and a repo rate cut, there will be monetary transmission. The cut in CRR and repo rate reduces cost. The cost reduction for us about would be Rs. 70 crore.”

Meanwhile, National Housing Bank (NHB) announced a reduction in it’s prime lending rate (PLR) by 0. 25% from 10 % to 9.75 % .

 “ The floating rate PLR - linked refinance portfolio of NHB will now be repriced at 0.25% less. Also the bank in its ALCO meeting held on Tuesday decided to reduce interest rate on special refinance scheme by 0.25%,” said a statement from NHB.

Mr. Rajeev Talwar, Group Executive Director, DLF Ltd, said, “With the rate cuts, there is likely to be a spurt in real estate demand. Also, with around Rs. 18,000 crore coming in, it will be easier for the real estate players to raise funds.”

Mr. Boman Irani, Chairman, Rustomjee Group, said, “The positive sentiment is likely to come back to the sector because of which sales were under pressure.”

Src: ET and mydigitalfc.com 

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