RBI policy: How will further hike in repo rate impact your loan EMIs?
According to a Mint poll of experts, the RBI may boost the repo rate by 50 basis points.
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
| Bank | Interest Rate (p.a.) | Processing Fee |
| Aditya Birla Capital | 14% p.a. -26% p.a. | Up to 2% |
| Axis Bank | 12% p.a.- 21% p.a. | At bank's discretion |
| Bank of Baroda | 10.50% p.a. - 12.50% p.a. | Up to 2% |
| Bank of India | 10.35% p.a. - 12.35% p.a. | Up to 2% |
| Bank of Maharashtra | 9.45% p.a. - 12.80% p.a. | Up to 1% |
| Central Bank of India | 9.85% and above | Up to 1% |
| Citibank | 9.99% p.a. - 16.49% p.a. | Up to 3% |
| City Union Bank | 12.75% p.a. | 1.00% subject to a minimum of Rs.250 |
| Federal Bank | 10.49% p.a. - 17.99% p.a. | Up to 3% |
| Fullerton India | 11.99% p.a. - 36% p.a. | Up to 6% |
| HDFC Bank | 10.5% p.a. - 21.00% p.a. | Up to 2.50% |
| Home Credit Cash Loan | 19% p.a. - 49% p.a. | 0%-5% |
| HSBC Bank | 9.50% p.a. - 15.25% p.a. | Up to 1% |
| IDBI Bank | 8.15% p.a. - 10.90% p.a. | Contact the bank |
| IDFC First Bank | 10.49% p.a. onwards | Up to 3.5% |
| IIFL | 24% p.a. onwards | 2% onwards |
| Indian Overseas Bank | 9.30% p.a. - 10.80% p.a. | Up to 0.50% |
| IndusInd Bank | 10.49% p.a. - 31.50% p.a. | 3% onwards |
| J&K Bank | 10.80% p.a. | Up to Rs.500 |
| Karnataka Bank | 12% p.a. - 17% p.a. | Maximum of Rs.8,500 |
| Karur Vysya Bank | 9.40% p.a. - 19.00% p.a. | 0.30% onwards |
| Kotak Mahindra Bank | 10.25% and above | Up to 2.5% |
| Punjab National Bank | 7.90% p.a. onwards | Up to 1.00% |
| RBL Bank | 14% p.a. - 23% p.a. | Up to 3.5% |
| South Indian Bank | 10.60% p.a. - 18.10% p.a. | Up to 2% |
| State Bank of India | 9.60% p.a. - 15.65% p.a. | Up to 1.50% |
| Tata Capital | 10.99% onwards | Up to 2.75% |
| TurboLoan Powered by Chola | 15% - 21% (fixed) p.a. | 3.00% |
| Ujjivan Small Finance Bank | 11.49% p.a. - 16.49% p.a. | At bank's discretion |
| Yes Bank | 10.99% 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 Financiers | 8.00% | 1.00% |
| Aditya Birla | 9.00% | 1% |
| Axis Bank | 6.90% | Rs. 10,000 |
| Bandhan Bank | 6.40% -13.50% | 1% (Rs.5,000) |
| Bank of Baroda | 6.90% to 8.25% | Contact the bank for information |
| Bank of India | 6.90% | - |
| Bank of Maharashtra | 6.80% | Rs. 10,000 |
| Canara Bank | 7.05% 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 India | 6.85% | Rs. 20,000 |
| Citibank | 6.75% | Rs. 10,000 |
| DBS Bank | 7.30% | 0.25% (Rs. 10,000) |
| Dhanlaxmi Bank | 7.85% | Rs. 10,000 |
| DHFL Housing Finance | 8.75% | Rs. 2500 |
| Federal Bank | 7.65% | Rs. 3,000 - Rs. 7,500 |
| GIC Housing Finance | 7.45% | Rs. 2,500 |
| HDFC LTD | 7.00%* | Rs. 3,000 - Rs. 5,000(plus taxes)* |
| HSBC Bank | 6.45% | 1% (Rs. 10,000) |
| Hudco Home Loan | 9.45% | NA |
| IDBI Bank | 6.75% | 0.50% (Rs. 2,500 - Rs.5,000) |
| IDFC First Bank | 6.50% | Rs. 5,000 - Rs. 5,000 |
| IIFL | 10.50% | 1.25% |
| India Shelter Finance | 12.00% | 2.00% |
| Indiabulls | 7.60% | 0.50% onwards |
| Indian Overseas Bank | 7.05% | 0.50% (Max Rs. 20,000) |
| Jammu and Kashmir Bank | 7.20% | Rs. 500 - Rs. 10,000 |
| Karnataka Bank | 7.50% | Rs. 250 |
| Karur Vysya Bank | 7.20% | Rs. 5,000 |
| Kotak Mahindra Bank | 7.00% p.a. to 7.60% p.a. | 0.50% |
| LIC Housing Finance | 6.90% | Rs. 10,000 -Rs. 15,000 |
| PNB Housing Finance | 6.99% | Up to 0.50% |
| Punjab and Sind Bank | 6.85% | Full Waiver |
| Punjab National Bank | 6.50% | 0.35% (Max Rs. 15,000) |
| Reliance Home Finance | 9.75% | Rs. 3,000 - Rs. 6,500 |
| Saraswat Bank Home Loan | 6.70% | Nil |
| Shriram Housing | 8.90% | NA |
| South Indian Bank | 7.85% | 0.50% (Rs. 5,000 - Rs. 10,000) |
| Standard Chartered Bank | 7.99% | 1% |
| State Bank of India | 7.05% p.a. -10.85% p.a | 0.35% onwards |
| Sundaram Home Finance | 6.95% | Rs.3,000 (for salaried) |
| Tamilnad Mercantile Bank | 8.25% | Rs. 15,000 |
| Tata Capital | 6.90% | 0.50% |
| UCO Bank | 6.50% | 0.15% (Rs. 1,500 - Rs. 15,000) |
| Union Bank of India | 6.90% | - |
| United Bank of India | 8.00% | 0.59% (Rs. 1,180 - Rs. 11,800) |
| Yes Bank | 8.95% | 1% (Rs. 10,000) |
Source: BankBazaar
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First Published:6 Jun 2022, 10:41 AM IST
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