Punjab Newsline | New Delhi
Reserve Bank of India (RBI) has raised the repo rate by 25 basis points, taking it from 5.25 per cent to 5.50 per cent. RBI Governor Sanjay Malhotra announced the decision on Wednesday after the Monetary Policy Committee (MPC) unanimously approved the hike.
The move is likely to increase borrowing costs for banks and could have a direct impact on retail borrowers, particularly those servicing floating-rate home loans.
For a ₹30 lakh home loan for 20 years at an interest rate of 8.5 per cent, the monthly EMI is currently around ₹26,035. If the lender passes on the full 25-basis-point increase and the interest rate rises to 8.75 per cent, the EMI could increase to approximately ₹26,511.
This translates into an additional monthly burden of around ₹476, or nearly ₹5,712 a year.
However, borrowers may not necessarily see an immediate increase in their monthly EMI. Banks can also choose to keep the EMI unchanged and extend the loan tenure. While this may prevent an immediate rise in monthly payments, it can increase the total interest payable over the life of the loan.
The impact becomes more significant on larger loans. For example, a ₹50 lakh home loan for 25 years at 7.5 per cent interest carries an EMI of around ₹36,950. If the interest rate rises to 7.75 per cent, the EMI could increase to approximately ₹37,767, translating into an increase of about ₹817 per month.
Over the full loan tenure, the additional interest burden in this example could be around ₹2.45 lakh, assuming the higher rate continues and the loan tenure remains unchanged.
The actual impact of the RBI’s decision will depend on how much of the rate hike individual banks pass on to borrowers. Lenders may adjust either the EMI, the loan tenure, or both.
For home loan borrowers, the latest rate hike therefore means keeping a close watch on revised interest rates, EMIs and the overall cost of borrowing.
