RBI hiked interest rates by 0.35%
Worried about rising inflation, the Reserve Bank of India (RBI) has hiked the repo rate by 0.35%. Because of this, the repo rate has gone up from 5.90% to 6.25%, meaning everything from home loans to auto and personal loans will become more expensive and you will have to pay more EMIs.
Monetary policy meets every two months. The first meeting of this financial year was held in April. The RBI then kept the repo rate steady at 4%, but the RBI convened an emergency meeting on May 2 and 3 to hike the repo rate by 0.40% to 4.40%.
This change in repo rate has taken place after 22 May 2020. After this, the repo rate was increased by 0.50% in the meeting held on June 6-8. This increased the repo rate from 4.40% to 4.90%. Then in August it was increased by 0.50% to 5.40%. The interest rate rose to 5.90% in September.
Monetary policy meets every two months. In the first meeting of this financial year, inflation is still a cause for concern
5 out of 6 MPC members voted in favor of rate hike
4 out of 6 members favor withdrawal
Inflation is likely to remain above 4% for the next 12 months
Inflation expected to remain above target
Rural demand is improving
8 months in double digits in bank credit
Suppose a person named Rohit takes a loan of 30 lakhs at a fixed rate of 7.55% for 20 years. Their EMI is Rs 24,260. In 20 years he will have to pay an interest of Rs 28,22,304 at this rate, meaning he will have to pay a total of Rs 58,22,304 instead of Rs 30 lakh.
After Rohit took the loan, RBI hiked the repo rate by 0.35%. Banks also increase the interest rate by 0.35% for this reason. Now when a friend of Rohit approaches the same bank for a loan, the bank tells him the interest rate is 7.90% instead of 7.55%.
There are two types of loan interest rates, fixed and floater. In fixed, the interest rate of your loan stays the same from start to finish. A change in repo rate does not make any difference on this. At the same time the change in the repo rate in the floater also affects the interest rate of your loan. In such a situation, if you have taken a loan at a floater interest rate, the EMI will also increase.
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