The 6-member Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has unanimously voted to increase the benchmark policy rate by 50 basis points. As a result, the RBI’s repo rate on banks rose by 0.5% to 4.90%.
As a result, interest rates on loans have risen. The Reserve Bank of India (RBI) has forecast total inflation at 6.7% for the current fiscal and India’s economic growth (GDP) at 7.2%.
This sudden announcement by the Reserve Bank is bad news for home buyers and EMI payers alike.
How is the RBI interest rate hike directly linked to your EMIs?
A bank’s floating home loan interest rates must be linked to external criteria. This is the repo rate imposed by the RPE on most banks.
Therefore, every time the RBI repo rate is revised, there is a direct impact on the borrower’s EMI or maturity. Because the exchange of the repo rate is immediate, the borrower faces an impact on the home loan interest rate within three months.
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As the repo rate rises, so does the repo rate-linked lending rate (RLLR). Thus increasing the home loan (home loan). However, instead of increasing the EMI, in most cases, the term of the loan is increased by the banks.
