RBI Hikes Repo Rate By 25 Bps: Home, Car Loan EMIs To Get Costlier

New Delhi: The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) hiked repo rate by 25 basis points (bps) on Wednesday for the second time in last three months. With this hike, the repo rate now stands at 6.50 per cent.

This is a bad news for those who have taken loans from banks as they have to pay more equated monthly installments (EMIs) for home, car and personal loans.

Both public and private sector banks may soon pass on the repo rate hike to consumers by increasing their marginal cost-based lending rate (MCLR). The home loan EMIs may go up between Rs 500-Rs 1000 depending on the quantum of loan.

The rate hike, however, is a good news for savers and for retired people, who live on interest income. The recent hike in repo rate is likely to result in higher interest rate for fixed deposits.

It may be noted that State Bank of India has increased its interest rates on FDs having maturity of more than one year with effect from July 30, 2018.

Notably, repo rate is basically the rate at which the RBI lends money to commercial banks against the pledge of government securities, whenever the banks are in need of funds to meet their day-to-day obligations. Generally, these loans are for short duration up to two weeks.

When the RBI increases the repo rate, banks usually pass on the burden to the customers.