Home / News / India /  RBI policy: How will further hike in repo rate impact your loan EMIs?

You should evaluate the personal loan interest rates offered by several NBFCs and banks before applying for a personal loan with a certain bank. However, while choosing to get a personal loan or a home loan, many people approach the bank where they have their primary account. When you compare interest rates of various banks, you may find that another bank is giving personal loans and home loans at a much lower rate.

The Reserve Bank of India (RBI) increased the repo rate by 40 basis points to 4.40 percent on May 4, up from 4 percent previously. One basis point is one-hundredth of a percentage point. The repo rate was cut in May 2020 and remained steady until the recent rise. Furthermore, the Cash Reserve Ratio (CRR) was increased by 50 basis points, putting further upward pressure on interest rates. As the raise went into effect right away, borrowers could expect higher EMIs, whereas FD investors should expect higher returns on new FDs.

Meanwhile, according to a Mint poll of analysts, the RBI may hike the repo rate by 50 basis points and enhance the cash reserve ratio (CRR) during its meeting this week in order to control inflation. The monetary policy committee (MPC) of the central bank will meet on June 6-8.

MPC is expected to lift the repo rate from 4.4 percent to 4.9 percent, according to five out of 10 economists polled by Mint, with the remainder expecting a 35-40 basis point hike to 4.75-4.8 percent. Half of those questioned predict a 25-50 basis point increase in the CRR, or the percentage of deposits that banks must retain as reserve with the RBI.

Moreover, with retail inflation touching 7.79 percent in April, the government has announced several measures to contain the prices of essential goods, banning or restricting exports of wheat, sugar and iron ore. Therefore, the majority of economists expect the monetary policy committee to revise its inflation forecast higher.

The EMI for fixed rate loans, such as vehicle and personal loans, remains the same throughout the loan's term. As a result, the timing of your loan application is crucial. When you take out a loan at a low interest rate, you can preserve that rate for the full term of the loan, even if the general interest rate rises.

On the other hand, for home loan borrowers, the timing of taking the loan is less crucial because they typically borrow at floating rates. The rate hike may not make a substantial impact in the interest payout and EMI payments. As a result, even if you enter at a cheaper rate now, you will be charged a greater rate later if the lender raises its interest rates.

You have nothing to worry about the repo rate if you have an existing loan at a fixed rate. However, if you have floating rates on an existing loan or if you are planning to take a loan - at fixed or variable rates, you may have to pay a higher rate if the RBI hikes the repo rate further.

Present personal loan rates at various banks

BankInterest Rate (p.a.)Processing Fee
Aditya Birla Capital14% p.a. -26% p.a.Up to 2%
Axis Bank12% p.a.- 21% p.a.At bank's discretion
Bank of Baroda10.50% p.a. - 12.50% p.a.Up to 2%
Bank of India10.35% p.a. - 12.35% p.a.Up to 2%
Bank of Maharashtra9.45% p.a. - 12.80% p.a.Up to 1%
Central Bank of India9.85% and aboveUp to 1%
Citibank9.99% p.a. - 16.49% p.a.Up to 3%
City Union Bank12.75% p.a.1.00% subject to a minimum of Rs.250
Federal Bank10.49% p.a. - 17.99% p.a.Up to 3%
Fullerton India11.99% p.a. - 36% p.a.Up to 6%
HDFC Bank10.5% p.a. - 21.00% p.a.Up to 2.50%
Home Credit Cash Loan19% p.a. - 49% p.a.0%-5%
HSBC Bank9.50% p.a. - 15.25% p.a.Up to 1%
IDBI Bank8.15% p.a. - 10.90% p.a.Contact the bank
IDFC First Bank10.49% p.a. onwardsUp to 3.5%
IIFL24% p.a. onwards2% onwards
Indian Overseas Bank9.30% p.a. - 10.80% p.a.Up to 0.50%
IndusInd Bank10.49% p.a. - 31.50% p.a.3% onwards
J&K Bank10.80% p.a.Up to Rs.500
Karnataka Bank12% p.a. - 17% p.a.Maximum of Rs.8,500
Karur Vysya Bank9.40% p.a. - 19.00% p.a.0.30% onwards
Kotak Mahindra Bank10.25% and aboveUp to 2.5%
Punjab National Bank7.90% p.a. onwardsUp to 1.00%
RBL Bank14% p.a. - 23% p.a.Up to 3.5%
South Indian Bank10.60% p.a. - 18.10% p.a.Up to 2%
State Bank of India9.60% p.a. - 15.65% p.a.Up to 1.50%
Tata Capital10.99% onwardsUp to 2.75%
TurboLoan Powered by Chola15% - 21% (fixed) p.a.3.00%
Ujjivan Small Finance Bank11.49% p.a. - 16.49% p.a.At bank's discretion
Yes Bank10.99% p.a. onwards - 16.99% p.a.At bank's discretion Up to 2.50%

Source: BankBazaar

Present home loan rates at various banks

Aavas Financiers8.00%1.00%
Aditya Birla9.00%1%
Axis Bank6.90%Rs. 10,000
Bandhan Bank6.40% -13.50%1% (Rs.5,000)
Bank of Baroda6.90% to 8.25%Contact the bank for information
Bank of India6.90%-
Bank of Maharashtra6.80%Rs. 10,000
Canara Bank7.05% p.a. to 9.30% p.a.0.50% of the loan amount subject to a minimum of Rs. 1,500, and a maximum of Rs. 10,000
Central Bank of India6.85%Rs. 20,000
Citibank6.75%Rs. 10,000
DBS Bank7.30%0.25% (Rs. 10,000)
Dhanlaxmi Bank7.85%Rs. 10,000
DHFL Housing Finance8.75%Rs. 2500
Federal Bank7.65%Rs. 3,000 - Rs. 7,500
GIC Housing Finance7.45%Rs. 2,500
HDFC LTD7.00%*Rs. 3,000 - Rs. 5,000(plus taxes)*
HSBC Bank6.45%1% (Rs. 10,000)
Hudco Home Loan9.45%NA
IDBI Bank6.75%0.50% (Rs. 2,500 - Rs.5,000)
IDFC First Bank6.50%Rs. 5,000 - Rs. 5,000
IIFL10.50%1.25%
India Shelter Finance12.00%2.00%
Indiabulls7.60%0.50% onwards
Indian Overseas Bank7.05%0.50% (Max Rs. 20,000)
Jammu and Kashmir Bank7.20%Rs. 500 - Rs. 10,000
Karnataka Bank7.50%Rs. 250
Karur Vysya Bank7.20%Rs. 5,000
Kotak Mahindra Bank7.00% p.a. to 7.60% p.a.0.50%
LIC Housing Finance6.90%Rs. 10,000 -Rs. 15,000
PNB Housing Finance6.99%Up to 0.50%
Punjab and Sind Bank6.85%Full Waiver
Punjab National Bank6.50%0.35% (Max Rs. 15,000)
Reliance Home Finance9.75%Rs. 3,000 - Rs. 6,500
Saraswat Bank Home Loan6.70%Nil
Shriram Housing8.90%NA
South Indian Bank7.85%0.50% (Rs. 5,000 - Rs. 10,000)
Standard Chartered Bank7.99%1%
State Bank of India7.05% p.a. -10.85% p.a0.35% onwards
Sundaram Home Finance6.95%Rs.3,000 (for salaried)
Tamilnad Mercantile Bank8.25%Rs. 15,000
Tata Capital6.90%0.50%
UCO Bank6.50%0.15% (Rs. 1,500 - Rs. 15,000)
Union Bank of India6.90%-
United Bank of India8.00%0.59% (Rs. 1,180 - Rs. 11,800)
Yes Bank8.95%1% (Rs. 10,000)

Source: BankBazaar

ABOUT THE AUTHOR

Sounak Mukhopadhyay

Sounak Mukhopadhyay, who also goes by the name Sounak Mukherjee, has been producing digital news since 2012. He's worked for the International Business Times, The Inquisitr, and Moneycontrol in the past. He's also contributed to Free Press Journal and TheRichest with feature articles. He covers news for a wide range of subjects including business, finance, economy, politics and social media. Before working with digital news publications, he worked as a freelance content writer.
Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
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