RBI hikes Repo Rate Before the festive season to shock public, EMIs set ton rise
The Reserve Bank of India’s decision to increase repo rate by 50 basis points and its hawkish stance in a bid to target inflation is expected to start impacting the residential real estate growth momentum that has remained strong for nearly two years acro
The Reserve Bank of India’s decision to increase repo rate by 50 basis points and its hawkish stance in a bid to target inflation is expected to start impacting the residential real estate growth momentum that has remained strong for nearly two years across the country.
RB I has increased the repo rate or prime lending rate by 50 basis points to 5.90 per cent, RBI Governor Shaktikanta Das said while announcing the decisions of the Monetary Policy Committee (MPC). The central bank had hiked repo rate four times since May to the recent 5.90 per cent.
The RBI’s Monetary Policy Committee also shifted its stance to withdrawal of accommodative policy of easy lending to check inflation, which will remain above the upper threshold of 6 per cent all through the current fiscal (2022-23). This is the second increase after five weeks when the central bank had increased repo rate by 40 basis points to 4.4 per cent. Home, auto and other loan EMIs are set to go up as the RBI today hiked its lending rate to banks by 50 basis points to 4.9 per cent to rein in inflation.
“The sharp dichotomy between growth and inflation sentiment is getting trickier globally. The central bank is challenged to strike equilibrium between spurring progressive GDP growth and docile inflation pressure out of tolerance limit. Any further hike in interest rate compounded with commodity inflation will act as a market dampener. The postponed consumption will hurt the housing market which is currently on the upward growth curve,” said Niranjan Hiranandani, Vice Chairman, NAREDCO.
There is no immediate respite for the borrowers from rising interest rates as the RBI in its monetary policy meeting held on September 30, decided to increase the repo rate again by 0.5% to 5.9%. This is the fourth repo rate hike within 5 months in a series of hikes which started on May 4 this year.
Existing borrowers, who have taken loans on floating rate basis such as home loans, will see their EMIs go up further. Most of the new borrowers, whether servicing fixed or floating rate loans, will need to pay higher EMIs for their loans as and when the banks pass on the latest policy rate hike.
With a hike in repo rate, EMIs for home, car and personal loans are also likely to go up. Home, car and personal loans will become more expensive as the cost of borrowing will go up for banks, leading to a rise in lending rates.
Moreover, Indian markets opened on a watchful note ahead of the Monetary Policy Committee (MPC) decision announcement by Shaktikanta Das. Sensex opened 0.28 per cent down at 56,251.19 whereas Nifty50 opened at 16,818.10. Indian Rupee, on the other hand, rose 14 paise to 81.59 against the US Dollar in early trade.