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RBI Hikes Repo Rate: Borrowers Brace for Higher EMIs
7 Oct
Summary
- Reserve Bank of India raised repo rate by 25 basis points.
- Home loan EMIs could increase by Rs 800-870 monthly.
- New fixed deposit investors may see higher interest rates.
The Reserve Bank of India's Monetary Policy Committee has elevated the repo rate by 25 basis points, bringing it to 5.5%. This decision, made on Wednesday, follows a review of inflation and economic growth conditions. It is the first repo rate increase implemented by the RBI since February 2023.
For borrowers with floating-rate home loans linked to external benchmarks, this rate hike could translate to higher monthly payments. For instance, a Rs 50 lakh home loan could see its Equated Monthly Installment (EMI) increase by approximately Rs 817 to Rs 870, depending on the loan tenure, potentially leading to increased interest outgo over the loan's life.
Existing fixed deposit holders are unlikely to see immediate changes to their deposit rates. However, individuals opening new fixed deposits or renewing existing ones may stand to benefit. Banks might increase their deposit rates in response to the RBI's policy change, offering new investors approximately Rs 12,500 more in annual interest on a Rs 50 lakh deposit before taxes.
