How RBI policy outcome will impact home loan borrowers explained


The Reserve Bank of India has released a key proposal with the goal of improving both the flexibility and transparency of rates of interest on variable-rate loans. “It is proposed to put in place a transparent framework for reset of interest rates on floating interest loans. The framework will require Regulated Entities to (i) clearly communicate with borrowers for resetting the tenor and/or EMI; (ii) provide options for switching to fixed-rate loans or foreclosure of loans; (iii) disclose various charges incidental to the exercise of the options; and (iv) ensure proper communication of key information to borrowers. These measures will further strengthen consumer protection,” Reserve Bank Governor Shaktikanta Das said. 

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“The concept entails putting in place a clear method for resetting the rate of interest on loans of this kind. The Governor of the Reserve Bank of India has highlighted this plan, emphasising the necessity for an easier and more organised approach regarding interest rate changes,” said LC Mittal, Director, Motia Group.

The framework that has been suggested is intended to give borrowers with variable rates of interest loans with a more apparent less unpredictable process for resetting interest rates. It would improve openness about interest rate computations and allow borrowers to transition from fluctuating to fixed rates, providing stability and security against future volatility. This approach is consistent with the RBI’s commitment to maintaining a stable lending environment, he added.

As widely anticipated, the RBI has decided to keep the repo rates unchanged at 6.5%. 

“This is nothing but good news for aspiring homebuyers on the market for purchase in the near future. The unchanged repo rate will help maintain the momentum in housing sales – particularly in the mid and luxury segments, which did significantly well in H1 2023,” said Anuj Puri, Chairman – ANAROCK Group.

“Meanwhile, an unchanged repo rate will make lending institutions avoid any hike in rate, thereby creating a conducive environment for the demand in the industry. The positive ramification will be felt across residential as well as commercial segments with a jump in investment activities,” said Subhash Goel, MD, Goel Ganga Developments.



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Updated: 10 Aug 2023, 11:33 AM IST

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