The Reserve Bank of India (RBI) hiked the repo rate by 40 basis points in a surprise move to combat rising inflation. The Repo rate is the key rate at which the RBI lends short-term funds to commercial banks.
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This may be worrisome for existing, and potential borrowers of home and car loans as their interest rate and subsequent EMIs will increase. As per the RBI rules, banks are required to link the interest rates of loans with an external benchmark, which is usually the RBI’s repo rate.
The final interest comes out to be a sum of external benchmark rate + margin + risk premium. Therefore, a rise in the external benchmark or, in this case, the repo rate will cause a hike in interest rates as well. This also means the deposit rates offered by the banks are expected to increase, providing some relief to the common man.
Here are the details of how much EMI borrowers will need to pay following the repo rate and the subsequent interest hike on home loans.
For a home loan of Rs 30 lakh
| Home loan amount (Rs) | Assumed interest rate (p.a.) | Assumed tenure (years) | Existing EMI (Rs) | New interest rate (after repo rate change) | New EMI (Rs) |
| 30 lakh | 6.75 percent | 20 | 22,811 | 7.15 percent | 23,530 |
For a home loan of Rs 50 lakh
| Home loan amount (Rs) | Assumed interest rate (p.a.) | Assumed tenure (years) | Existing EMI (Rs) | New interest rate (after repo rate change) | New EMI (Rs) |
| 50 lakh | 6.75 percent | 20 | 38,018 | 7.15 percent | 39,216 |
For a home loan of Rs 1 crore
| Home loan amount (Rs) | Assumed interest rate (p.a.) | Assumed tenure (years) | Existing EMI (Rs) | New interest rate (after repo rate change) | New EMI (Rs) |
| 1 crore | 6.75 percent | 20 | 76,036 | 7.15 percent | 78,433 |
Here are the details of how much EMI borrowers will need to pay following the repo rate and the subsequent interest hike on car loans.
For a car loan of Rs 10 lakh
| Car loan amount (Rs) | Assumed interest rate (p.a.) | Assumed tenure (years) | Existing EMI (Rs) | New interest rate (after repo rate change) | New EMI (Rs) |
| 10 lakh | 7 percent | 7 | 15,093 | 7.4 percent | 15,289 |
For a car loan of Rs 20 lakh
| Car loan amount (Rs) | Assumed interest rate (p.a.) | Assumed tenure (years) | Existing EMI (Rs) | New interest rate (after repo rate change) | New EMI (Rs) |
| 20 lakh | 7 percent | 7 | 30,185 | 7.4 percent | 30,578 |
Note: The above calculations are done based on assumed interest rates and tenures. The interest rates may vary from bank to bank, and the tenure may also vary as per the loan policy.
