Impact of RBI’s Rate Cuts on the common person
Yesterday, Reserve Bank of India (RBI) has slashed repo rate and CRR
25bps point each on the occasion of its 3rd quarter monetary policy review for
FY 2013-13. How can the investor get benefit from it. On short, Repo rate is
the rate at which banks borrow from the central bank (RBI in India) and CRR
(Cash Reserve Ratio) is the amount of deposit which banks keep deposit with
RBI. After cut the rate now repo rate and CRR are at 7.75% and 4% respectively.
Interest rate factor play very significant for home loan borrower, equity
investor, debt fund investor and fix deposit investors. Indian banks has given
already some indication about base loan rate cut yesterday. After the base rate
cut all home loan borrower will get benefit definitely but it depend on the timing
of the rate cut announcement of the particular bank. If your bank is charging
already high interest on home loan then it would be better transfer your
balance loan amount to other bank. The bank would charge some minimal
conversion charges for the loan amount transfer.
The equity investor would also get benefit of rate cut. As corporate will
borrow at lower cost and it would increase profitability of the companies. It
means working capital will available to companies at cheaper rate compare with earlier
cost. Equity investor should invest through SIP.
Fixed income investors have better option to long term bank FD and long
tenure income fund with a 12 -24 months time horizon. There is much expectation
rate cut further within 1 year point of view so bond investor can make a
capital appreciation with interest income. Bond investment is very suitable
option for higher tax bracket investor in tax saving point of view.
Feel free
to ask any queries related investment
Arvind Trivedi
Certified Financial
Planner
No comments:
Post a Comment