RBIs New Credit Policy is Beneficial for Home Buyers
The RBI (Reserve Bank of India) which slashed its new credit policy after a gap of three years for 2012-2013 has benefited the home buyers to a greater extent, especially as it followed 13 hikes in the last year. The policy states that the short term lending rate has been reduced to 8 pc from 0.50 pc, the cash reserve ratio was reserved by 4.75 % and the inflation rate was anticipated to 6.5%. This will further reduce the cost of auto and corporate loans along with the home cost.
- The reduction of the prepayment penalty on home loans has resulted in a state wherein the home loan consumers are exempted from paying charges while prepaying their existing home loan. People with a home loan who are unhappy with their bank can feasibly switch to another bank without paying any penalty charges. This rule is also applicable for loans which are taken on floating interest rates wherein there is a fluctuation of rates.
- This rule was passed with an aim to eradicate the bias between the new loan borrowers and the existing loan seekers. Also better pricing of home loans with floating rate will find its scope. One of the important aspects of the economic factor is the fluctuations concerning home loans. It is very important that the borrower has to plan in advance about the interest rate cycles and think of ways of prepaying the tenure to avoid paying the overall loan cost.
- This policy by the RBI helps the loan seekers to manage their EMIs efficiently and save their income. Also home buyers in future will find this beneficial while property buying. And the repayment of the home loan can be segregated and paid annually by reducing the interest rates.
- Apart from this, the deft investment plan will also help the long term home loan seekers. One can also repay the loan by using recurring deposits, insurance policies and tax saving fixed deposits. The abolition of the prepayment on penalty on home loans was also due to the recommendations of the Damodaran Committee and the banks were restricted from collecting the penalty on home loans from before the tenure completion. This will also make it easier for the borrowers to repay the loan early and also give them an opportunity to plan for another property investment.
- Overall this policy acts as a barrier wherein the banks are restricted from charging penalties on loans with a floating rate of interest and also to create uniformity among the loan seekers. In order to make it clear for all the laymen, detailed guidelines will be issued separately by the RBI. Further this will also restrict the rapid rise of gold loan firms and their systemic risks and the lending norms.
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