RBI hikes Repo rates by 50 basis :The EMIs for the loan will increase as the Reserve Bank of India (RBI), on Friday, raised the repo rate 50 basis points to 5.40 percent to control inflation.
Many banks have raised their borrowing rates already, and others will increase their rates following the central bank’s hike.
“For all financial institutions, including NBFCs Cash In the Inventory. All NBFCs must borrow money from customers and then lend it to them. The difference between the borrowing cost and the income from lending is the profit of an NBFC. To maintain profitability, NBFC must increase their lending costs in order to offset rising borrowing costs. Interest rates on loans are usually variable and linked to Repo costs directly or indirectly. NBFCs can change the lending rate when the Repo rate has been changed by the government. This increase in the lending rate eventually leads to an increase in EMI while the loan duration remains constant,” stated Anshu Agarwal (India Finance Head) at Branch International.
RBI hikes Repo rates by 50 basis
The central bank raises the repo rate, which is worrisome to existing and future borrowers because their EMIs rise and interest rates go up.
The RBI norms require banks to link interest rates on loans to an external benchmark. This is usually the RBI repo rate. The bank deposit rates will likely rise, which should provide some relief for the common man.
Home loan borrowers need to be careful about when they take out a loan after the rate hike by central bank. They usually borrow at floating rates so it is important to choose the right time.
Amit Goyal CEO of India Sotheby’s International Realty stated that “home loan rates are expected to settle at around 8 percent per annum.” This can cause a temporary psychological impact on demand for mid- and affordable housing, but it won’t last for long.
The unanimous vote of the Reserve Bank of India’s Monetary Policy Committee (MPC), to raise the policy repo rate to 5.40 percent has been taken.
Therefore, the Standing Deposit Facility rate (SDF), was adjusted to 5.15 % and Marginal Standing Facility rate (MSF), were adjusted to 5.65 % and the Bank rate to 5.65 %.
After a rate increase of 40 basis points in May and 50 in June, this is the third consecutive rate rise by the central bank. The RBI raised the rate by 140 basis point with Friday’s hike. This is a significant increase from May this year.
The central bank retained its GDP projection at 7.2%, Q1 at 16.2%, Q2 at 6.2%, Q3 at 4.1%, and Q4 @ 4.0%, with risks well balanced. For Q1FY24, real GDp growth is forecast at 6.7%.
The inflation projections for 2022-23 are unchanged at 6.7%. Q2 is at 7.1%, Q3 at 6.4%, and Q4 is at 5.8%. Risks are equally balanced. CPI Inflation is forecast at 5.0 percent for Q1FY24.