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Impact of RBI Latest Guidelines on Business Loan and its EMIs

Highlights

  • RBI Guidelines related to the Reduction in Repo Rate.
  • Affect of the Reduced Repo Rate on Business Loans and Business Loan EMIs.
  • Take a Business Loan at a low rate of interest after there is a reduction in the Repo Rate.
  • Get a Relief from paying the Business Loan EMIs for 3 Months.

The Indian Government and our finance minister are in full force to control the financial crisis that are going on in the country due to the Coronavirus Outbreak. Therefore the Reserve Bank of India has cut off the Repo Rate by 0.75%, formerly it was 5.15% and now it has fallen to 4.40%. Repo rate is basically the rate at which the Reserve Bank of India lends money to commercial banks. Now the commercial bank can take more funds from RBI and help the commonly employed and self-employed individuals to fight the financial crisis happening due to lockdowns.

Many businesses are also been affected by the lockdown and the exiting business loan takers are worried about the repayment of the loans. So, the Reduced Repo Rate will have a great impact on the EMIs of Business loans. But before we the advantages of the RBI’s decision, let’s throw some light on the guidelines given by the Reserve Bank of India.

Guideline Given by RBI between 24th to 27th March

  • Repo Rate is Reduced by 0.75%.
  • The Reverse Repo Rate is reduced by 90 basis points.
  • The Cash Reserve Ratio is Reduced by 100 basis points to release INR 1.37 lakh crores for 1 year.
  • RBI has reduced the Minimum Daily Cash Reserve Ratio balance to 80% from 90% till the 30th of June 2020.
  • Every term loan borrower will get 3 months moratorium on the outstanding loan amount for repayment.
  • All the interest on working capital facilities to be deferred by 3 months.
  • The Total Liquidity Injection would be 3.4% of the GDP.
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Benefits of the RBI Guideline for the Business Loan Takers

We can see that the lockdown in the whole country has affected many businesses but the RBI guidelines have leveraged the businesses and gave an opportunity to the businessmen to bring their business on track. You must go through the benefits of this smart move made by the Reserve bank of India.

A Relief from EMIs

According to the RBI’s guidelines, every individual having a business loan gets 3 months moratorium on the EMIs. In simple words, it means that you can skip the EMI of an existing business loan for three months. No extra interest or penalty will be charged while skipping the EMIs. On the other hand, skipping the EMIs for 3 months will not affect your CIBIL or Credit Score. You are free from the burden of EMIs for 3 months.

Advantage of this Guideline

  • A sign of relief from the business Loan EMIs for 3 months.
  • Tackle the Financial Crisis easily that is due to the Coronavirus.
  • Although you don’t pay EMI on the existing business loan for 3 months, your credit score will not be affected.
  • Make the optimum utilization of the 3 months’ time to bring your business back on the track.

Business Loans will be Available at a Lower Rate of Interest

As the RBI has cut off the Repo Rate by 0.75%, so the commercial can borrow the money from RBI at a lower rate and as a result of which the commercial banks will grant business loans to the owners at a lower rate of interest. Therefore you take a fresh business loan or a top-up on your current business loan at a low rate of interest.

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Advantage of this Guideline

  • Take a top-up business loan at a low rate of interest and improve your business activities.
  • Apply for a fresh business loan to manage your working capital.
  • Stabilize all your business activities during lockdowns through the new business loans available at a cheaper Interest rate.

Conclusion

You can see how the RBI guideline will help you to take a businessloan and improve the financial condition of your business. If you have anexisting business loan then you can skip the EMI of that loan for 3 months andno penalty will be charged for doing so. On the other hand, you can meet thefinancial crises by taking a new business loan from the commercial banks asthey will grant you a business loan at a low rate of interest because theReserve Bank has reduced the Repo Rate and Reverse Repo Rate. Now it is up toyou to decide the best move for your business.

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Personal Loan Interest Rates May 2020
Fullerton India14.00% - 33.00%
HDFC Bank10.75% - 21.45%
ICICI Bank10.99% - 18.49%
IndusInd Bank10.99% - 16.00%
Kotak Bank10.99% - 20.99%
RBL17.50% - 24.00%
Standard Chartered Bank11.50% - 18.00%
Tata Capital10.99% - 18.00%

Home Loan Interest Rates May 2020
Axis Bank8.10% - 8.85%
Bank of Baroda7.25% - 8.25%
Citibank8.20%
HDFC7.75% - 8.65%
ICICI Bank7.70% - 8.80%
Indiabulls Housing Finance Limited8.80% - 11.05%
Kotak Bank8.20% - 9.25%
LIC Housing7.40% - 8.85%
Piramal Capital & Housing Finance9.00% - 9.10%
PNB Housing Finance8.95% - 9.20%
Reliance Home Finance8.75% - 14.00%
State Bank of India/SBI7.35% - 8.00%
Tata Capital9.20% - 9.35%