EMI relief for home loan takers in the offing

MUMBAI: Home Loan borrowers hoping for lower interest rates may have to wait a little longer. Banks are not likely to pass on the benefits of RBI's repo rate cut to borrowers this month.

"There is no reason to believe that easing will happen at a rapid pace but it may happen at a measured pace. We expect easing of deposit rates as we enter new fiscal year, and as this happens, the transmission will take place," said SS Mundra, chairman and managing director, Bank of Baroda.

However, borrowers need not despair. While interest rates are unlikely to be reduced immediately, they can expect relief in the coming weeks. "Since the deposit growth has been muted, interest rates on deposits too have remained high. Therefore, we expect the monetary transmission to take place only after two to three months," added B A Prabhakar, chairman and managing director, Andhra Bank.

And when banks do cut rates, you will have two options to choose from - reducing your EMIs or the loan tenure. "In such cases, it might be tempting to get your EMI lowered, but refrain from doing so. Getting the tenure shortened should be your priority so that you clear your dues sooner," says certified financial planner Pankaj Mathpal, CEO, Optima Money Managers. Remember, shorter tenure would mean lower interest burden on your loan.