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RBI rate hike: Borrowers stare at higher EMIs, reduced eligibility; depositors stand to gain

Existing home loan borrowers may see EMIs rising as there is not much room for loan tenures to increase. On the other hand, they may gain from a likely rise in fixed deposit rates

December 08, 2022 / 01:32 PM IST

Reserve Bank of India (RBI) Governor Shaktikanta Das has announced a 35 basis-point (bps) hike in the repo rate to 6.25 percent, its highest level since August 2018. The central bank has hiked rates by a cumulative 225 bps since it started the rate tightening cycle in May this year.

The consecutive rate hikes are affecting individual borrowers who have taken – or are looking for floating-rate home, car and consumer durable loans. “All consumer loans have got costlier this year. Borrowers are under the pressure of mounting interest rates and rising equated monthly instalments (EMIs),” says Adhil Shetty, CEO, BankBazaar.com.

Rate hike impact on new and existing home loan borrowers

All floating-rate retail loans sanctioned by banks after October 1, 2019, are linked to an external benchmark, which is the repo rate in most cases. So home loans linked to repo rates would have the quickest transmission of increased policy rates.