New Delhi/Ground Bureau — The Reserve Bank of India has dealt a major blow to millions of bank customers by increasing the repo rate by 25 basis points after a gap of four years. With this revision, the new repo rate stands at 5.5 percent, which will directly impact all types of loans, making borrowing more expensive for common citizens.
The decision was taken during the Monetary Policy Committee meeting to curb persistent inflation pressures. Long-term stability measures were maintained during previous quarters, but changing global economic dynamics prompted the central bank to tighten the policy rates now.
Impact on home and car loan EMIs
Following this announcement, major public and private sector banks will soon revise their lending rates. Existing borrowers with home, car, or personal loans will experience an immediate hike in their monthly EMIs. Banks will either extend the tenure or increase the monthly installment amount, straining household budgets.
Real estate markets are also expected to witness a slowdown as expensive loans deter buyers from making immediate investments in property. Developers note that buyers might postpone their purchase decisions due to increased overall costs.
Better returns for fixed deposit investors
While borrowers face challenges, savers and investors will benefit as banks increase interest rates on fixed deposits and savings accounts. Senior citizens will get higher returns on their accumulated savings as banks roll out revised deposit schemes.
Financial experts advise citizens to carefully review their personal budgets and avoid unnecessary debts as future monetary policy reviews will heavily depend on upcoming inflation data and market conditions.
