Governor Shaktikanta Das of the Reserve Bank of India declared Friday at the end of the current fiscal’s last monetary policy analysis session to hold the repo and reverse repo rates unchanged at 4 percent and 3.35 percent, namely, while retaining a stimulative policy “Inflation has relaxed below the top threshold level of 6 percent for the first time during the COVID-19 period,” he emphasized, continuing, real GDP inflation is estimated at 10.5 percent in 2021-22 – in the context of 26.2 to 8.3 percent in H1 and 6.0 percent in Q3.” Against this context, let us explore how today’s RBI Governor’s decisions could influence your investments.
Influence on Fixed Deposit Investors
Guaranteed yields, liquidity ratios and ease of investing make fixed deposits, particularly among risk-averse investors such as senior citizens, one of the most common financial products in our country. Currently, since the pandemic outbreak last year, FD interest rates have continued to hit multi-year lows, something that has bothered investors, and today’s Central Bank decision to keep the key policy rate untouched at 4 percent will not bring them much optimism. In general, though most banks deliver around 3 percent and 5.50 percent p.a. on FDs, A few private and small finance banks offer between 5.75 percent-7.50 percent p.a. on regular FDs for up to 5 years of less than Rs.1 crore. Follow the below covered table for better clarification.
Influence on home loan borrowers
There are home loan borrowers on the other side of the age who might support the policy of the RBI to keep the repo rate steady at 4 percent p.a. That has forced most banks to deliver home loans at multi-decade declines. In fact, there are currently as many as 15 banks and three housing finance firms providing home loans beginning at less than 7% p.a. Hence, the policy of the central bank to retain the key policy rate will ensure that home loan rates remain stable, at minimum for the immediate future, making the current period an ideal time to invest in one of the most significant financial priorities of any individual’s existence. Another vital aspect striving homeowners need not neglect is the decision of the Union Budget 2021 to extend the additional tax deduction gain of Rs.1.5 lakh under Section 80EEA for qualifying first-time holders of subsidized homes until March 31, 2022.
Conclusion
Prospective homeowners ought to bear in mind that the low interest rates on home loans may not be the only excuse for them to make the move. A long-term financial investment that has no scope for any negligence is purchasing a home loan. And, rest assured you have the funds available from the margin and a steady source of income so that the debt can be repaid conveniently within the loan period. Probably more importantly, before applying for a home loan, take the appropriate measures to enhance your credit score because the best-possible rates are applied only to those debtors who have a score stronger than 750. Please keep in mind that repayments could be difficult, particularly since repo-linked loan EMIs will also rise whenever the RBI increases the key policy rate in the potential future, so it is well suggested that to take your home loan decision smartly. Debtors currently funding MCLR-linked home loans must also recommend switching to the repo-linked loan scheme to take advantage of the low rates because this allows them, after remembering the refinancing costs, to significantly decrease their overall interest burden. Finally, the new low home loan rate cycle could also enable homeowners to make as many principal payments as practicable to lessen their interest outflow and reach debt-free significantly quicker.
