The RBI has already reduced the repo rate by a total of 115 basis points since February, on top of the 135 basis points in a reduction cycle last year, from 6.50 percent, responding to slowing growth.
The Reserve Bank of India (RBI) reducing the repo rate to an all-time low, term loans offered by the lenders have also seen a substantial reduction. A reduction in the repo rate means that the commercial banks can borrow more money from SARB at a cheaper rate, which means that the lending rates for consumers also decreases Some of the public lenders such as Central Bank of India, Canara Bank and Punjab National Bank are offering personal loans at a rate as low as 8.35%. During this pandemic situation and reduction in the profit margin of the banking sector, banks keep their interest rates lowest through which their customers can also get the facility and the liquidity in the banks will be maintained.
Recently, the Honorable Prime Minister met the bank’s official, and a clarification was made to distribute the heavy amount of loans to the public in which liquidity will be inflow.
The interest rates on term loans have been decreasing since RBI started reducing policy rates to revive demand and economic activity that has taken a setback due to the lockdown. In its last monetary policy meeting, the central bank reduced the repo rate by 40 basis points (bps) to 4% and reduced the reverse repo rates by 40 bps to 3.35%. One basis point is one-hundredth of a percentage point.
The process involved in getting a personal loan is simple and it is a way to use tomorrow’s income today. It can be used for a variety of end uses, including medical treatment, home renovation, travel, wedding, and any other urgent financial requirement. If the personal loan has been obtained on a fixed interest rate basis, then the interest rates would not be affected by changes in the repo rate. The amount of loan depends on the customer’s salary repayment capacity. However, the interest rates are high compared with others like the car loan and are also unsecured loans. Unsecured loans are those which are not backed by any asset. The loan amount and interest rate depend on factors such as your income, credit, repayment capacity, and others. As personal loans come with high-interest rates, continuous default in payment will put you on a downward spiral.
