As you can see if we reduce the repo rate by 25 or 50 basis points, people with mortgages and vehicle loans get a nice saving. But the same repo rate move has little or no effect on a microloan, which has an interest rate of roughly 30%, or an informal loan, at an even higher rate.
The time is coming when policymakers will need to consider tightening selected macroprudential policy tools to tackle pockets of elevated vulnerability. For instance, throughout the COVID-19 crisis the demand for housing continued to increase in many countries, drawing attention to risks in the residential real estate sector.