National Affairs

RBI Increased Repo Rate. Loan EMI To Up

The Reserve Bank of India ( RBI ) has once again reviewed the monetary policy and once again the repo rate has been increased. 

Today i.e. Wednesday, February 8, 2023, in the monetary policy, the repo rate has been increased by 25 basis points. 

In this way, from May last year i.e. the fifth month of the year 2022 till now, an increase of 2.10 has been recorded in the repo rate. 

Where the repo rate was 4.40 percent in May 2022, today after about 10 months i.e. in February 2023, it has increased to 6.50 percent. 

We will tell further in this news what is the effect of repo rate on you.

First of all, let us know what is the repo rate. This is the rate at which the Reserve Bank of India (RBI) lends to commercial banks i.e. all banks like your SBI, ICICI, HDFC, PNB .

 In this repo means repurpose agreement or repurpose option. 

These commercial banks take loans from RBI to give loans to their customers. Explain that the central bank also uses the repo rate to control inflation.

As we mentioned above, RBI also uses report to control inflation. Apart from this, the increase or decrease in the repo rate also has a big impact on your home loan EMI. 

The increase in repo rate not only affects inflation and home loan EMI , but also affects the interest rate when you go for a new car loan, personal loan, business loan. 

Not only this, on the basis of repo rate, all commercial banks restructure any kind of loan and pay interest on your savings account.

 Overall, the thing is that when the repo rate increases, the interest rate increases and when the repo rate decreases, the interest rates start decreasing.

Effect on home loan

The calculation after the increase in the repo rate today has not been done yet. Certainly, the interest rate on home loan is likely to reach around 9 percent.

8.70%1 December 2022 to 31 October 2037

8.20%1st September 2022 to 30th November 2022

7.20%1 June 2022 to 31 August 2022

6.80%1 June 2021 to 31 May 2022

If you have taken a home loan, then the increase in the repo rate also has a big impact on your home loan EMI. Your EMI may not increase, but when you go into the details of your home loan, you will see that your EMI is the same, but due to increase in interest rates, your principal amount is accumulating less and your home loan repayment time increases.

That is, the way the repo rate has increased in the last about 10 months, due to the increase in home loan interest rates, the months to repay your loan have also increased. 

Repo rate has the opposite effect on inflation. Generally, when the report is low, then inflation increases more. 

But as the repo rate increases, there is also a decline in the inflation rate. However, such measures are not successful at all, many other reasons are also responsible for inflation. 

With the aim of controlling inflation, RBI has increased the repo rate by 2.10 percent basis points since May 2022.

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