Home loans to be transparent, but at the cost of volatile rates6 min read 10 Dec 2018, 07:27 AM IST
Pegging loan rates to external benchmarks will make transmission of rates more transparent
Since April 2012, the Reserve Bank of India (RBI) reduced the repo rate on 11 occasions. Repo rate is the rate at which RBI lends money to banks for short periods, when the latter face shortage of funds. While you might have cheered the fall hoping that the interest rates that you pay on your home loan will also drop, the actual impact on the ground would have left you disappointed. This is because even as you bring home a floating rate, which ideally should go up and down with the interest rate movement, the transmissions have not been transparent enough as home loan rates haven’t become cheaper by the proportion of fall in RBI rates or not fallen at all.
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