Repo rate hike to hit home borrowers

Hyderabad: The Reserve Bank of India’s decision to raise the repo rate will have an impact on existing home loan borrowers as the interest rate is expected to increase by 0.5% to 1%.

The RBI raised its Repo rate by 40 basis points to 4.40% on May 4. According to financial experts, banks would pass this burden on to consumers. According to a senior bank official, the repo rate is the interest rate charged by RBI from banks in the country when those banks borrow money. When the banks bring money to RBI, they will have to shell out additional money and these banks will certainly pass some of the interest on to the consumers.

Speaking to *The Hans India*, Vice Chairman of Agrasen Bank, Naveen Kumar Agarwal said that due to the increase in Repo, commercial banks have to pay more interest to the Reserve Bank of India and in turn they will also increase the rate. of interest on their tracks. Thus, there will be a

impact on common man who borrows money from commercial banks due to increase in repo rate by Reserve Bank of India. EMI will be increased for variable rate on interest loans, Naveen Kumar Agarwal said. Asked about the impact on fixed deposits, Naveen Kumar Agarwal said that the RBI had not changed its reverse repo rate so there would be no impact on the interest rate on the fixed deposits. Reverse repo rate means that whenever commercial banks have excess money, they will make a deposit with the Reserve Bank of India at a certain rate of interest known as the reverse repo rate reversed.

Experts have said that Repo rates are mainly increased to control inflation, as loans will become more expensive and the purchasing power of the common man will decrease, resulting in less money in the hands of the man. ordinary and will decrease the demand for the commodity.

Another banker said that currently the inflation index has reached its highest level in the last 17 months. In 2018, the inflation rate was 3.95% while in March 2022, the inflation rate reached 6.95%, which must be considered very high. Supply and demand will play a major role in inflation. Currently, the interest rate ranges from 6.6% to 7.9% depending on the borrower’s credit rating.

A technician Rajeev Jopat, who took out a loan of Rs 30 lakh from LIC Housing Finance, said authorities had informed that interest would rise. “The bank staff alerted me to the increase in interest and told me that they will inform me within a few days of the exact amount of interest,” he told The Hans India.

Rajeev said the loan repayment term would increase with the lender‘s income. If the lender can repay higher amounts, the interest rate may drop because the number of EMIs would be reduced. But otherwise, borrowers will have to pay higher interest making housing.

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