Double bonanza for home loan borrowers

It may well be a double bonanza for home loan Borrowers, With commercial banks announcing the new lending rate structure based on the policy of Marginal Cost of Funds Based Lending Rates (MCLR), favouring home loan seekers , ahead of the April 5 RBI policy review expected to cut lending rates. Effective from April 1 the new lending rate policy is aimed at ensuring quicker transmission of interest rate cuts to home loan borrowers. Last year despite cumulative rate cut of 100 bps by the RBI, only a marginal part was passed on to home loan borrowers. Beginning with the new MCLR regime, the lending rate by the large public and private sector banks-SBI and HDFC, will be cheaper by 10 bps. And as per the SBI, the new one year rates for male & female home loan borrowers are 9.45 & 9.40 per cent, respectively. We think MCLR and further RBI repo rates reduction is a good sign towards growth of the economy. Banking experts believe that going forward as lending rates get reduced, these will spur demand leading to growth. Indranil Sen Gupta, economist for India research at Bank of America, Merryl Lynch believes that with growth at 200 bps below the potential lending rate cuts will push up demand, complimenting the consumption stimulus of 0.5 percent of GDP from the Seventh Pay Commission for the next three years.

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