Post repo rate cut, lending rates sector set to fall

Just after the Reserve Bank of India has brought 40bps cut in repo rate, its positive effect has started being felt as major banks have brought down their lending rates. If this downward spiral in lending rates continues, it may infuse positive sentiments in various sectors of the economy including the crumbling real estate sector. Home loan rates are now set to fall and the real estate developers may also expect sanction of their project loans on reduced rates.

Taking a lead in transmitting the benefits of all the accumulated benefits of repo rate cut since January this year, the country’s major banks have reduced their lending rates.  Punjab National Bank has reduced its lending rate by 4%. Now its repo-linked lending rate stands at 6.65% from the earlier 7.05% which will further bring down the home loan rate as well. The bank has also revised its MCLR downwards by 15 bps and then it has also reduced term deposit rate. Bank of India and UCO Bank have also cut their repo-based lending rate to 6.90.

Besides reducing the repo rate by 40 bps, the RBI has also reduced its reverse repo rate by 40 bps to ease out the financial burden on banks in the wake of the Covid-19 pandemic. Any reduction in reverse repo rate increases the availability of funds for lending to the banks.