RBI Hikes Repo Rate By 50 Basis Points To 5.9 Per Cent; Revises Down FY23 GDP Growth Forecast To 7 Per Cent

RBI Repo Rate: RBI has increased the repo rate by 50 basis points to 5.9%. All loans will become costlier due to increase in repo rate. Actually repo rate is the rate at which RBI provides loans to other banks. In contrast, reverse repo rate is the interest rate that the central bank pays to the banks on keeping money with the RBI.

RBI Repo Rate: RBI Governor has announced to increase the repo rate after the MPC meeting which lasted for three days (September 28 to September 30). RBI has announced a 0.50% hike in the repo rate. Now the repo rate of RBI has increased from 5.4% to 5.9%. Earlier in August, RBI had increased the repo rate by 50 basis points. In the MPC meeting held in May also, the repo rate was increased by 50 basis points to 4.90%.

After increasing the repo rate, banks will increase the interest rate, due to which the EMI will be expensive.

Suppose a person named Ramkumar has taken a loan of Rs 10 lakh from a bank at the rate of 6.5% for 20 years. The EMI of his loan is currently Rs 7456. In this way, he will have to pay interest of Rs 7,89,376 to the bank at the rate of 6.5% in 20 years. That is, instead of a loan of 10, he will have to pay Rs 17,89,376 to the bank.

70 to 72 thousand rupees more will have to be paid on a loan of ten lakh rupees approved for twenty years

Now his brother-in-law Mohan, after six months, took a loan of the same amount from another bank for 10 years only. But its interest rate is 7% per annum. The reason for this is that during the last six months, the central bank has increased the repo rate by 50 basis points. After that the bank has also increased its interest rate by .50% to seven percent. Monthly EMI of his brother-in-law as per the new rate of interest for the loan of the same amount is Rs.7753. That is, Rs 297 more than the EMI of Ramkumar. In this situation, his brother-in-law Mohan will have to pay a total of Rs 18,60,717 to the bank in ten years at an interest rate of seven per cent, which is Rs 71 thousand more than the loan amount due to his brother-in-law Ramkumar.

Therefore, due to the increase in the interest rate by the RBI, it has been decided that the EMI of your loan is going to increase in the coming time. In the next few days, banks can announce to increase their interest rates. Let us know how expensive the loan EMI of Rs 10, 20 and 30 lakh will be due to the increase in repo rate by 50 basis points?

If loan is taken at fixed interest rate then there is no need to worry

If you have taken a loan from the bank at a fixed rate, then you do not need to worry due to the increase in the repo rate. This will also have an impact on loans taken only at variable rates. Further fluctuations on fixed rate loans are not affected by interest rates. At the same time, the loan taken at variable interest rates keeps on changing.

It has been said by the Central Bank that the decision will be applicable only with the present effect. RBI Governor Shaktikanta Das has given information about this decision. RBI Governor has said that the risk of inflation still remains. He has said that the country’s economic condition is strong in challenging times. Our GDP growth is the best. RBI Governor has said that the whole world is going through a crisis. There is turmoil in all segments of the financial market. The demand is expected to pick up during the festivals, he added. The accommodative stance of the RBI remains intact.

He said that the CPI is above our target, so the MPC has decided to increase the repo rate. Five out of six members of the MPC have given a decision in favor of increasing the repo rate. He said liquidity would improve as government spending increased. The demand in rural areas is showing improvement in FY23. Real GDP growth is estimated at 7 per cent for FY23.

How does repo rate work?

The Reserve Bank of India uses the repo rate to control the flow of money in the market. When the market is in the grip of inflation, the RBI increases the repo rate. The increased repo rate means that the banks which take money from RBI will be made available at the increased interest rate.

Loan EMI will be expensive due to increase in repo rate

In such a situation, due to increase in interest rate, banks will take less money from RBI and the flow of money in the market will remain under control. If banks take loan from RBI at expensive rate, then they will also issue loan to common people at expensive rate. Due to this, the EMI of the common man will be expensive. In view of this, people will take less loan and spend less. This will reduce the demand in the market and the whole process will help in controlling inflation. Anshu Agarwal, Head of Finance India, Branch International, says that all NBFCs take money from the market and give it to customers in the form of loans. The difference between the cost of borrowing and the income from lending is the profit for the NBFC. If the cost of borrowing increases, the lending rate will also increase. In this case, its burden will fall on the customers. The increase in the repo rate will increase the EMI.

How will the hike in repo rate affect your loan EMIs?

All loans will become costlier due to increase in repo rate. Actually repo rate is the rate at which RBI provides loans to other banks. In contrast, reverse repo rate is the interest rate that the central bank pays to the banks on keeping money with the RBI. Therefore it is generally believed that if RBI reduces the repo rate then banks will reduce the interest rate and if RBI increases the repo rate then banks will increase the interest rate. This will make the loan available to the common man expensive.