The Reserve Bank of India's (RBI's) Monetary Policy Committee (MPC) began a three-day deliberation on Wednesday as central banks around the globe face the Herculean task of taming sticky consumer inflation without causing an economic slowdown. Economists expect the central bank's top brass — responsible for changes to key interest rates — to announce an increase in the repo rate.
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Economists in a CNBC-TV18 poll expect the central bank to announce a hike of 50 basis points in the repo rate — or the key rate at which the RBI lends short-term funds to commercial banks — on September 30.
Since May, the RBI has increased the repo rate three times. Over this period, the key policy rate has risen from 4 percent to 5.40 percent. It will reach 5.90 percent if RBI increases rates by 50 basis points in this monetary policy. In percentage terms, one basis point is one-hundredth of one percent.
Here is how the repo rate hike will impact your finances:
For borrowers
Essentially, the repo rate refers to the rate at which commercial banks borrow money by selling their securities to the Reserve Bank of India (RBI) in order to maintain liquidity, regardless of funds shortages. It is one of the main tools of RBI to keep inflation under control.
An increase in the repo rate increases the cost of borrowing for the banks. This is seen in the form of higher loan and deposit interest rates for account holders or you basically. So borrowing money from the bank will become expensive.
In terms of home loans and car loans, banks either manage the cost by increasing the tenure or by increasing the EMI.
Here are the latest home loan rates offered by key banks:
| Banks | Starting Interest Rate (p.a.) | Processing Fees |
| Kotak Mahindra Bank | 7.50% p.a. onwards | 0.50% |
| Citibank | 6.65% p.a. onwards | Rs. 10,000 |
| Union Bank of India | 7.90% p.a. onwards | - |
| Bank of Baroda | 7.45% p.a. onwards | Contact the bank for information |
| Central Bank of India | 7.20% p.a. to 7.65% p.a. | Rs. 20,000 |
| Bank of India | 7.30% p.a. onwards | - |
| SBI | 8.05% p.a. onwards | 0.35% onwards |
| HDFC Home Loans | 8.10% p.a. onwards* | 0.5% or Rs.3,000 whichever is higher |
| LIC Housing Finance | 7.55% p.a. onwards | Rs. 10,000 -Rs. 15,000 |
| Axis Bank | 7.60% p.a. onwards | Rs. 10,000 |
| Canara Bank | 8.10% p.a. onwards | 0.50% of the loan amount |
| Punjab and Sind Bank | 7.50% p.a. onwards | Full Waiver |
| IDFC First Bank | 7.50% p.a. onwards | Rs. 5,000 - Rs. 5,000 |
| Bank of Maharashtra | 7.30% p.a. onwards | Rs. 10,000 |
| Indian Overseas Bank | 7.05% p.a. onwards | 0.50% (Max Rs. 20,000) |
| Punjab National Bank | 7.40% p.a. onward | 0.35% (Max Rs. 15,000) |
(Source: Bankbazaar)
For depositors
A high repo rate comes as good news for depositors. Depending on how banks pass on the new interest rate hike, bank depositors get higher returns.
Fixed deposits are included in these deposits.
Here are the fixed deposit rates offered by key banks:
| Name of Bank | For General Citizens (p.a.) | For Senior Citizens (p.a) |
| Yes Bank FD | 3.25% to 6.75% | 3.75% to 7.50% |
| IndusInd Bank FD | 3.50% to 6.75% | 4.25% to 7.50% |
| UCO Bank FD | 2.55% to 5.60% | 2.80% to 6.10% |
| Central Bank of India FD | 2.75% to 5.60% | Contact the bank |
| Indian Bank FD | 2.80% to 5.60% | 3.30% to 6.10% |
| Indian Overseas Bank FD | 3.25% to 6.00% | 3.75% to 6.50% |
| Bandhan Bank FD | 3.00% to 7.00% | 3.75% to 7.50% |
| DBS Bank FD | 2.50% to 6.50% | Contact the bank |
| HSBC Bank FD | 2.25% to 6.00% | 2.75% to 6.50% |
| Duetsche Bank FD | 2.75% to 7.00% | 2.75% to 7.00% |
| SBM Bank FD | 2.50% to 7.00% | Contact the bank |
(Source: Bankbazaar)
Home buyers
The rise in repo rate has adverse effects on the real estate sector interest rates on home loans go up prices of properties go up and likely the demand goes down.
“If another rate hike takes place, home loan interest rates may enter the red zone, leading to short-term turbulence on overall housing demand, especially when buyers are likely to invest in their dream homes during the ongoing festive season. The recent consecutive repo rate hikes have already added to buyers’ overall acquisition cost,” Ramani Sastri, Chairman & MD, Sterling Developers Pvt. Ltd told CNBC-TV18.com.
(Edited by : Anshul)
First Published: Sept 29, 2022 3:28 PM IST
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