Mumbai: The Reserve Bank of India (RBI) on Friday raised the repo rate by 50 basis points to 5.4%, the third consecutive increase since May in a bid to calm stubbornly high inflation and defend the rupiah. Notably, the redemption rate was raised to bring the interest rate back to pre-pandemic levels.Also Read – ICICI Bank, PNB and Bank of Baroda raise interest rates on loans after RBI redemption rates hike. Here’s how much more you’ll pay
What is the RBI repo rate and why is it increased?
For the uninitiated, the repo rate means the rate at which commercial banks borrow money from the Reserve Bank of India. If RBI increases the repo rate, the cost of borrowing for retail and other loans by banks also increases. Subsequently, banks will pass on the higher costs to borrowers by raising interest rates on various loans. As a result, borrowers of various loans, including home loans and personal loans, will pay more in monthly equivalent payments (EMI). Also Read – RBI policy rate set to cross 6% this fiscal year, report says
EMI home loan: how much more will you pay?
After the current repo rate hike by the RBI, the total repo rate hike is now 1.4%. This increase will impact both new and existing borrowers. For borrowers who took out home loans before April 2022, the interest rate is expected to increase by around 8% from 6.5% to 7% after RBI’s August monetary policy. Also Read – RBI Raises Repo Rate by 50bps to 5.40%; Lend EMI to become more expensive
If someone has already taken a home loan of Rs 30 lakh at 7% for a term of 20 years in April 2022, then the EMI will increase from Rs 25,845 to Rs 23,259. There will be a massive jump of Rs 2 586 in monthly IMEs.
While announcing the rate hike, RBI Governor Shaktikanta Das gave no indication of a change in stance or a possible pause in the next policy due in late September.
The central bank, however, kept the GDP growth projection at 7.2% for the current fiscal year ending March 31, 2023 and kept the inflation outlook for the year unchanged at 6.7%.
“Inflationary pressures are widespread and core inflation remains elevated. Inflation is expected to remain above the upper tolerance level of 6% in the first three quarters of 2022-23, bringing the risk of destabilizing inflation expectations and trigger second-round effects,” he said.
Stating that there has been some decline in global commodity prices, particularly industrial metal prices, and some softening in global food prices, the governor said domestic edible oil prices are expected to decline further. thanks to the improvement in supply from the main producers. countries.