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RBI rate cut to make loans more affordable and boost growth
The Finance Minister has stated that the reduction in rates by RBI will be strengthening the economy to a significant extent. As a result of rate cut, the loans will become more affordable, which will lead to a faster growth of the economy. This will benefit the property buyers and small businesses. The repo rate has been reduced by the RBI to 6.25%. This refers to the rate at which the RBI lends to the banks. A reduction of 0.25% will make the loans cheaper, which will prove beneficial for the real estate industry. The banks will be able to soften the rates of interest. As the property market in India is expanding fast, it will benefit from the decreased rates of interest.
The decision made by RBI to reduce the repo rate by 0.25% to 6.25% from 6.5% brings a change to the neutral stance of the body. The small business houses will be able to get affordable credit and the homeowners will be able to get the loans at lower rates of interest. This is a positive development for the real estate industry, as the sales figures will increase in the coming years. Several players in the real estate industry have welcomed the decision of the RBI to cut the repo rates. The policy statement is pragmatic and balanced, according to the experts, that will strengthen the growth in the country.
The removal of FPI restriction has also been welcomed by the leading industry experts. It is quite realistic to assess the inflation and growth. The decisions made by the RBI are quite relevant and the real estate industry has a lot of benefits to reap from the same. Over the last few years, the growth has been slow in the real estate segment. Presently, the industry is coming back to its normal health, and this is a good time to come up with the change.
It had been stipulated that no FPI (foreign portfolio investor) will get an exposure to more than 20% of the corporate band portfolio to any single corporate this includes exposure to certain entities that are associated to the corporate. The authorities decided this as a part of the FPI investment review in corporate debt, that had been undertaken in April, 2018. The FPIs were exempted from this requirement till the end of March 2019 on the new investments, to make adjustments in their portfolios. This provision had been made to provide incentives to the FPIs to maintain an asset portfolio. According to the market feedback, this stipulation had constrained the foreign investors. The RBI, in an attempt to encourage a greater number of investors to get access to the market of corporate debt, announced the proposal to withdraw the limit of exposure in its sixth bi-monthly policy.
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