In an early and pleasant surprise move RBI has announced a reduction in repo rate by 25 basis points and CRR has also been reduced in the same proportion to reach 4%. We were pretty hopeful of the move during RBI’s February review as there has been demand from across all the sectors, corners and corridors for it. While cutting of repo rate will be good news for new borrowers if banks go ahead and cut their base rates, old borrowers under floating rates can also expect a revision in the interest rates. The CRR cut is also likely to have a long term impact on the interest rates on deposits.

The cut in repo rates is good news as it is likely to lower the cost of borrowing and the reduction in CRR rate might improve the availability of funds bringing in more liquidity to the system. With the announcement of RBI policy, banks would now surely consider lowering interest rates passing on the benefits to the end users. This will further bring down home and auto loans once the banks implements the RBI policy, fixed deposit rates are also likely to go down.

This initiative will help in reducing inflationary expectations and reviving investment for overall growth. Real estate sector will be one of the major gainer with the repo rate cut as this will affect favorably on home loans EMIs and also that the sector still offers great investment options for investors as well as individual buyers.

Any reduction in home loan and budget incentives always show positive impact on the buyer sentiments. RBI’s move will surely set a favorable mood and will also raise hopes for upcoming Union Budget. We are going through an encouraging phase of positive changes and this will further boost it.