• Privacy Policy
  • About Us
  • Contact Us
Saturday, January 16, 2021
  • Login
  • Register
No Result
View All Result
NEWSLETTER
Ahval News Six
  • Home
  • Health
  • Sport
  • Science
  • Entertainment
  • Technology
  • Business
  • Submit News Article
  • Home
  • Health
  • Sport
  • Science
  • Entertainment
  • Technology
  • Business
  • Submit News Article
No Result
View All Result
Ahval News Six
No Result
View All Result
Home Business

What is the Reverse Repo Rate and Current Repo Rate?

by sakshii
December 28, 2020
in Business
0
What is the Reverse Repo Rate and Current Repo Rate?
0
SHARES
11
VIEWS

The Reserve Bank of India retained its status quo in case of repurchase (repo) rate in Q3 FY20, keeping it the same as the previous announcement. Resultantly, the current repo rate and reserve repo rate now stand at 4% and 3.35% respectively. The decision has been made primarily to arrest the ongoing recession, and to boost the country’s growth at a macroeconomic level. However, this stance of keeping the repurchase rate unchanged is likely to influence home loan borrowers at a different level. 

Nevertheless, before anything, individuals need to gain a concrete idea about what reverse and current repo rate refer to.

What is the reverse repurchase rate?

The interest rate at which the RBI pays interest to commercial financial institutions while borrowing from them for a short term is known as reverse repurchase rate. In other words, when RBI plans to withdraw cash and liquidity as a means to control inflation, it offers lucrative interest rates to commercial financial institutions. It thus attracts financial institutions to park their credit with RBI to get better rates. 

Thus, this rate, coupled with repurchase rate, helps in stabilising the cash flow in the economy.

Significance of reserve repurchase rate

Like the current repo rate, this rate is also a crucial instrument to ensure balanced liquidity and cash circulation in the economy. When inflation remains under control, RBI sets a higher reserve repurchase rate, allowing financial institutions to earn interest for a short-term period by lending to the central bank. 

On the contrary during the cash shortage in the economy, RBI lowers this rate so that the financial institutions lower their lending rate for the prospective borrowers, making various loan products, including the likes of home loans, more affordable than before.

However, to better understand this economic metric, one needs to know the actual meaning of repurchase rate in detail. 

Repo rate meaning – A look

Repo rate refers to the interest rate at which commercial financial institutions borrow from RBI. This rate works precisely the opposite of that reserve repurchase rate. However, the aim of this monetary tool is alike, and serves in bringing stability in liquidity ratio and facilitates economic growth.

For instance, in case of an inflation-stricken economy, RBI cut its current repo rate so that financial institutions lower their lending rate. Eventually, borrowers whose home loans are linked to repurchase rate will get benefits of this rate cut. 

Nevertheless, they also need to know about MCLR based home loans to calculate the margin of their profit that stems from this RBI rate cut. 

Impact of current repo rate and reverse rate cut on borrowers 

The RBI announced several repurchase rate cuts in the recent past, which translated directly to the interest rates applicable to home loan borrowers on a large scale. Since financial institutions need to follow the guidelines of RBI, they have reduced their lending rate accordingly. It means that borrowers can now get a loan at lower rates, and the overall cost of borrowing is also likely to decrease accordingly. 

Moreover, select financial institutions also extend pre-approved offers to make the loan application process straightforward and less time-consuming. These offers are available on a range of loan products such as loans against property, home loans, etc. All you need to do is enter your name and mobile number to check your pre-approved loan offer instantly. 

Nevertheless, along with these rates, the GST applicability on home loans was also reduced. Thus, you also need to know how this GST rate cut brings the best time to plan your new home purchase. It will help you to suitably decide on applying for a home loan to leverage the benefits of rate cuts.

Tags: current repo rateRepo RateReverse Repo Rate
sakshii

sakshii

Next Post
5 Best PC Games

5 Best PC Games

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

I agree to the Terms & Conditions and Privacy Policy.

Ads

Recommended

Bitcoin Dominance Over Altcoins

Reasons Indicating Bitcoin Dominance Over Altcoins

9 months ago
41
florida

Florida Travel Tips: When To Go And Where To Go?

8 months ago
28

Popular News

    Connect with us

    Ads:

    guest post marketplace
    buy backlinks

    About Us

    Ahval News Six is your Health, Business, Science ,Technology,Sport and Entertainment news website. We provide you with the latest breaking news and videos straight from the all industry.

    Category

    • Arts
    • Beauty
    • Business
    • City
    • Covid19
    • Crypto Currency
    • Culture
    • Daily
    • Decoration
    • Digital Marketing
    • Education
    • Entertainment
    • Fashion
    • Featured
    • food
    • Gaming
    • Genral
    • Health
    • Health and Medical
    • Laws
    • Life
    • Lifestyle
    • Movie
    • Music
    • National
    • Opinion
    • Politics
    • Product Review
    • Promotion
    • Science and Nature
    • SEO
    • Sport
    • Stories
    • Technology
    • Town
    • Travel
    • Trending
    • U.S.
    • Uncategorized
    • World

    Site Links

    • Register
    • Log in
    • Entries feed
    • Comments feed
    • WordPress.org

    Newsletter

    Subscribe Now for get latest News daily
    SUBSCRIBE

    • Home
    • Health
    • Sport
    • Science
    • Entertainment
    • Technology
    • Business
    • Submit News Article

    © 2020 Ahval News Six

    No Result
    View All Result
    • Politics
    • World
    • Business
    • National
    • Entertainment
    • Gaming
    • Movie
    • Music
    • Fashion
    • Lifestyle
    • Travel
    • Health
    • Food
    • Sport
    • Science and Nature

    © 2020 Ahval News Six

    Welcome Back!

    Signin to your account

    Forgotten Password? Sign Up

    Create New Account!

    Fill the forms bellow to register

    *By registering into our website, you agree to the Terms & Conditions and Privacy Policy.
    All fields are required. Log In

    Retrieve your password

    Please enter your username or email address to reset your password.

    Log In

    Add Ahval News Six to your Homescreen!

    Add
    This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.