Contrary to widespread speculation, the Reserve Bank of India (RBI) has increased the repo rate for the sixth time in a row, this time by 25 basis points to 6.50 percent with immediate effect. Banks are expected to increase interest rates on retail loans following the RBI’s latest increment to the repo rate on February 8.
As a result, it is essential for the average person to comprehend the implications of the Reserve Bank of India (RBI)’s decision to raise the repo rate on their monthly EMI.
Despite the RBI’s most recent rate increase, the amount of increases has decreased gradually over the past three MPCs, going from 50 bps to 35 bps to 25 bps now.
It is true that both new loan borrowers and bank depositors will be directly affected by an increase in interest rates.
Following an increase in the repo rate, banks raise the interest rate on their consumer loans, typically extending the loan’s term rather than increasing the monthly EMI.
The cost of borrowing increases when interest rates rise, and banks pass this cost on to borrowers, driving up the cost of EMIs. However, fixed deposit holders who want to earn competitive rates welcome a rate increase.
Banks and other lending institutions have already increased all loan interest rates. The court’s decision today opens the door for lenders to follow suit, inevitably raising borrowing costs.
EMIs on a home loan:
Your EMI would increase by approximately Rs 758, from Rs 19,458 to Rs 20,216, if you took out a home loan for Rs 25 lakh at a rate of 7.05 percent per year for 20 years. Instead of the current 21,69,819 rupees, the total amount of interest that would be owed would be 23,51,918 rupees.
For a loan of Rs. 50 lakh, the EMI will go from Rs. 38,915 to Rs. 40,433, and the total amount of interest due will be Rs. 47,03,840.
