The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) meeting, which started on Monday, has caught the attention of home and car loan borrowers, hoping for some good news. RBI Governor Shaktikanta Das will announce the outcome of the meeting on Wednesday, October 9, and though many are expecting no immediate changes in interest rates, there is some relief in sight.
Experts suggest that while the repo rate—currently at 6.50%—is unlikely to change this time, a reduction in home loan interest rates could be on the horizon. Borrowers might see a reduction of up to 0.40% on their loan interest rates, likely from December 2024.
What the Experts Say
According to Kaushik Das, Chief Economist for India and South Asia at Deutsche Bank, it’s unlikely that the RBI will follow the recent rate cuts made by the US Federal Reserve. “We don’t expect any change in the policy repo rate in this meeting,” he stated. However, he also hinted at possible rate reductions by banks in the near future, especially for borrowers with good credit scores.
This indicates that while there may not be immediate relief in the October meeting, home and car loan EMIs could see some reduction in the last quarter of the fiscal year, particularly as banks roll out festive season offers to attract more customers.
EMI Reductions Likely from December
The festive season is a prime time for banks to introduce attractive loan schemes. Even if the RBI does not announce a rate cut in this meeting, it’s expected that banks will lower home loan interest rates from December 2024 to boost their market share. Borrowers with strong credit histories can anticipate a rate cut between 0.25% and 0.40%, making home loans more affordable.
So, if you’re planning to buy a home or car, keep an eye out for better deals around the end of the year when interest rates are expected to dip.
Why the Wait?
India’s retail inflation continues to be a concern, especially with ongoing geopolitical tensions in West Asia, affecting the price of crude oil and commodities. This has put added pressure on the economy, and as a result, the RBI is cautious about cutting rates right now.
The reconstituted Monetary Policy Committee, which includes three new external members, has started its discussions on how best to manage inflation while also supporting economic growth. Since February 2023, the RBI has held the repo rate steady at 6.50%, and experts believe that while inflation remains a key issue, there might be room for a rate cut by December.
What to Expect Going Forward
While this upcoming RBI policy meeting may not bring immediate relief, borrowers should remain optimistic. Banks are likely to announce rate cuts soon, particularly for home loans. A reduction in the repo rate by the RBI could further drive this, providing more affordable borrowing options for homebuyers.
In the meantime, keep an eye on your bank’s festive offers, as this period often brings additional benefits and lower interest rates.
