1. Banking/Finance

Commercial banks can now borrow from RBI at a lower rate, reducing their cost of funds. Even though the loan rates may decrease, the deposit rate would still be relatively the same, putting pressure on the bank’s Net Interest Margins (NIMs). This can also potentially impact profitability.

The demand for loans, including personal, business, education, home and car, will increase, especially in the retail and Small and Medium Enterprises (SME) segments.

With reduced EMIs on these loans, individuals will have more disposable income and spending appetite.

2. Auto

Since interest rates on car loans will be lower, it will make financing the vehicle cheaper and easier, boosting car sales significantly.

Borrowers with floating interest rates will benefit from this policy change. The lower borrowing rate for banks will pass down the benefits to the customers through reduced interest rates on their automobile loans.

When the repo rate cut was announced, the market reaction, as in the stocks of auto giants such as Tata Motors, Mahindra & Mahindra, Ashok Leyland and Maruti Suzuki, witnessed average gains of more than 4%.

On the other hand, small and mid-cap companies in infrastructure and other related industries witnessed a decline.

3. Real-Estate

Repo cut rates are more likely to have a positive impact on the overall real-estate sector. It will make home loans more affordable and will boost the demand for housing as well.

Lower interest rates may increase sales, reduce the inventory of unsold homes, and improve liquidity. It will also encourage developers to launch new infrastructural projects, creating opportunities for both homebuyers and investors.

Due to lower borrowing costs, it will be more attractive for businesses to invest in office real-estate and commercial properties, benefiting the commercial real-estate segments as well.