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Home›Variable Rate Loans›RBI Policy: How Will Another Repo Rate Increase Affect Your Lending Issuance?

RBI Policy: How Will Another Repo Rate Increase Affect Your Lending Issuance?

By Mary M. Cox
June 6, 2022
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You should check the personal loan interest rates offered by several NBFCs and banks before applying for a personal loan from a particular bank. However, when deciding to get a personal loan or home loan, many people turn to the bank where they have their main account. If you compare interest rates from different banks, you may find that another bank makes personal and home loans at a much lower rate.

The Reserve Bank of India (RBI) raised the repo rate by 40 basis points to 4.40 percent on May 4, from 4 percent previously. A basis point is one hundredth of a percentage point. The repo rate was lowered in May 2020 and remained stable until the recent hike. In addition, the cash reserve ratio (CRR) was increased by 50 basis points, which put further upward pressure on interest rates. Since the hike went into effect immediately, borrowers could expect higher PMIs, while FD investors should expect higher yields on new FDs.

Meanwhile, the RBI could hike the repo rate by 50 basis points and raise the cash reserve ratio (CRR) during its meeting this week to control inflation, according to a Mint poll of analysts. The Central Bank’s Monetary Policy Committee (MPC) will meet on June 6-8.

According to five in 10 economists polled by Mint, MPC is expected to raise the repo rate to 4.9% from 4.4%, while the rest expect a 35-40 basis point hike to 4.75%-4.8%. Half of the respondents forecast a 25 to 50 basis point increase in the CRR, or the percentage of deposits banks are required to hold as reserves with the RBI.

Also, as retail inflation hit 7.79 percent in April, the government has announced several measures to contain prices of essential goods by 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 upwards.

The EMI for fixed rate loans, like auto and personal loans, stays the same throughout the life of the loan. Therefore, the timing of your loan application is crucial. If you take out a loan at a low interest rate, you can get that interest rate for the entire term of the loan, even if the general interest rate increases.

On the other hand, the timing of the loan is less critical for home borrowers, as they typically borrow at variable rates. The rate hike may not have a material impact on the interest payout and PMI payments. Therefore, even if you get in now at a cheaper rate, you will be charged a higher rate later if the lender increases their rates.

You don’t have to worry about the repo rate if you have an existing fixed rate loan. However, if you have variable interest rates on an existing loan or plan to take out a loan — at fixed or variable rates — you may have to pay a higher interest rate if the RBI continues to raise the repo rate.

Present personal loan rates at different banks

Bank Interest rate (pa) handling fee
Aditya Birla capital 14% pa -26% pa up to 2%
axis bench 12% pa – 21% pa At the bank’s discretion
Bank of Baroda 10.50% pa – 12.50% pa up to 2%
Bank of India 10.35% pa – 12.35% pa up to 2%
Bank of Maharashtra 9.45% pa – 12.80% pa up to 1%
Central Bank of India 9.85% and more up to 1%
citibank 9.99% pa – 16.49% pa up to 3%
City Union Bank 12.75% pa 1.00% subject to a minimum of Rs.250
Federal Bank 10.49% pa – 17.99% pa up to 3%
Fullerton India 11.99% pa – 36% pa up to 6%
HDFC bank 10.5% pa – 21.00% pa Up to 2.50%
home loan cash loan 19% pa – 49% pa 0%-5%
HSBC bank 9.50% pa – 15.25% pa up to 1%
IDBI bank 8.15% pa – 10.90% pa Contact the bank
IDFC First Bank 10.49% pa upwards Up to 3.5%
IIFL 24% pa 2% up
Indian Foreign Bank 9.30% pa – 10.80% pa Up to 0.50%
IndustryInd Bank 10.49% pa – 31.50% pa 3% up
J&K Bank 10.80% pa Up to Rs.500
Karnataka Bank 12% pa – 17% pa Maximum 8,500 rupees
Karur Vysya Bank 9.40% pa – 19.00% pa 0.30% up
Kotak Mahindra Bank 10.25% and more Up to 2.5%
Punjab National Bank 7.90% pa upwards Up to 1.00%
RBL bank 14% pa – 23% pa Up to 3.5%
South Indian Bank 10.60% pa – 18.10% pa up to 2%
State Bank of India 9.60% pa – 15.65% pa Up to 1.50%
Tata Capital 10.99% up Up to 2.75%
TurboLoan Powered by Chola 15% – 21% (fixed) pa 3.00%
Ujjivan Small Finance Bank 11.49% pa – 16.49% pa At the bank’s discretion
yes bank 10.99% pa upwards – 16.99% pa At Bank’s discretion Up to 2.50%

Source: BankBazaar

Present home loan rates from different banks

Aava’s financiers 8.00% 1.00%
Aditya Birla 9.00% 1%
axis bench 6.90% Rs.10,000
Bandhan bench 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 bench 7.05% pa to 9.30% pa 0.50% of the loan amount with 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 tax)*
HSBC bank 6.45% 1% (Rs. 10,000)
Hudco Home Loans 9.45% N / A
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%
india bulls 7.60% 0.50% up
Indian Foreign 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% pa to 7.60% pa 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% Total 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 Loans 6.70% zero
Shriram case 8.90% N / A
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% pa -10.85% pa 0.35% up
Sundaram home financing 6.95% Rs.3,000 (for employees)
Tamilnad Mercantile Bank 8.25% Rs. 15,000
Tata Capital 6.90% 0.50%
UCO bench 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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