See EMIs Coming Down from Next Month: Kotak Mahindra Bank

There may be some good news on the EMI (equated monthly installment) front starting next month. Kotak Mahindra bank said it expects lending rates to start coming down form the first quarter of the next fiscal year starting in April. The RBI or Reserve Bank of India Governor Raghuram Rajan cut repo rate - the rate at which the central bank lends short-term money to banks - by 0.25 per cent on Wednesday in a surprise move.

If the transmission does indeed happen, it would result in cheaper EMIs on home loans, car loans etc.  

"My belief is that in the first quarter you will start to see the transmission of these rate cuts and my belief also is that there would be further rate cuts by the RBI during the current calendar year itself. So overall it should translate into significantly lower interest rates all round," C Jayaram, joint managing director, Kotak Mahindra Bank, told NDTV.

During the calendar year 2015, Kotak Mahindra Bank expects the central bank to cut rates by another 50 basis points or 0.50 per cent.

Lower interest rates would also translate into an uptick in credit growth, Mr Jayaram said.

"I think I'd be fairly optimistic if rate cuts translate more meaningfully into lower rates for consumers and there are more rate cuts which I expect will happen at least 50 bps in my opinion in this calendar year so if those sort of things happen then there will be a pick-up in consumer demand," he said.

Credit growth for banks in early February were near a decade-low of 10.4 per cent, as high costs, among other factors, deterred businesses and consumers from borrowing.

Dr Rajan, on Wednesday had said that he was confident that the RBI's move would prompt banks to reduce their lending rates.

"March is typically a time when banks try and hoard liquidity, but as we move into the new fiscal year we will see more transmission of lower interest rates," Dr Rajan said. (Watch)

(With Reuters inputs)