Home, auto loans to get more expensive

The Reserve Bank of India (RBI), for the first time today raised interest rates for the second straight meeting, on inflationary concerns. But retained its “neutral” stance as it aimed to contain inflation while not choking growth. The RBI Governor Urjit Patel-led six-member Monetary Policy Committee (MPC) increased the repo rate, at which it lends to other banks.

The hike in repo rate is bound to have a direct bearing on home and auto loans. The move will lead to an increase in the interest customers pay on loans (home loan, car loan or personal loan). EMIs are also likely to go up.

The RBI’s Monetary Policy Committee (MPC) raised the repo rate by 25 basis points to 6.50 percent. It is the first time since October 2013 that the rate has been increased at consecutive policy meetings.

In June, the MPC also increased the key rate by 25 bps.The rate action was in line with a Reuters poll last week, which showed 37 of 63 economists expecting a rate increase.

“Rising trade protectionism poses a grave risk to near-term and long-term global growth prospects by adversely impacting investment, disrupting global supply chains and hampering productivity,” the MPC warned in its policy statement. Five of the six members on the rate panel voted for the rate increase. The reverse repo rate was also raised by 25 basis points, to 6.25 percent.

 

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