Consequences of a Repo Rate Cut
The rate at which financial institutions borrow funds from the RBI in exchange for RBI-recognised security deposits is known as the repo rate. A repo rate cut enables financial lenders to lower their lending rates, thereby offering loans at much cheaper rates. The aspect of the market most affected by the RBI repo rate cut is mortgage loans like home loans. How repo rate revisions affect home loans? As a drop in the repo rate reduces the cost of borrowing for financial institutions, they can cut down on home loan interests. With reduced repo rate, lenders can offer home loans at a lower rate of interest. It is an additional benefit financial lenders can pass onto their customers. How repo rate affects economy? The repo rate determines the interest rate at which financial organisations lend money to borrowers. It affects the economy in the following ways – Inflation control- A high repo rate increases the borrowing cost for financial organisations. This makes ...