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Rate Cuts may Not be of Much Benefit to Customers

Gold Silver Reports — Rate Cuts may Not be of Much Benefit to Customers — On correlation between car demand and low rates — To the extent that buyers are borrowing money from banks to finance their (car) purchases, the interest rate is a major aspect of their total cost and therefore, any lowering of interest rates by the banks, not by the RBI, has an impact on their decision. The repo rate cuts have been happening periodically over the last year and a half or two years, but the extent to which the borrowers have benefited from these is lower than what the rate cuts have been.

On impact of rate cut

It depends whether the banks are able to lower their rates because for a bank to pass on a rate cut to the customer, it means to lower their lending rates.Either they have to lower rates of borrowing from the depositors or their costs of operations have to come down. I do not think there will be significant reductions in operating costs in near term, which means reduction in deposit rates.If deposit rates come down, then you can expect the benefits to be passed on, but if the deposit rates cannot come down, if rates cannot come down very much, then you will find that these repo rate cuts will not have too much of a benefit to any customer. — Neal Bhai Reports

Rate Cuts may Not be of Much Benefit to Customers

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