Reserve Bank of India has just made your financial planning little tougher. A cut in the benchmark interest rates means you better start looking for newer ways to park your money. Our Simple flowchart explains you why and how.
How to interpret this news?
Banks Borrow from RBI for short duration. “REPO Rate is the rate that RBI charges to them for this borrowing. Reverse Repo is the rate at which banks lend to RBI”
Repo Rate coming down from 6.75% to 5.75% means
Get Ready to Pay Less
home loans, business loans, personal and auto loans likely to become cheaper. Interest rates may reduce marginally and so will your EMI if you are taking fresh loans. Negotiate with your bank to reduce your existing home loan rates too.
A Repo rate cut also means
1. Get Ready to Earn Less Also:
Interest you earn from fixed deposits, recurring deposits or even public provident fund (PPF) will also come down.
Relying on PPF or fixed deposit for your retirement or kids education or marriage will only disappoint you.
Find newer ways (in short systematic investment into shares/funds) to invest your money and be ready to take little more risk for same.
Stay away from schemes/plans and even people who promise you a 10% guaranteed return.