The Reserve Bank of India has increased the repo rate by 0.25 per cent in the Monetary Policy Committee meeting at the end of the financial year 2022-23.
The Reserve Bank of India has increased the repo rate by 0.25 per cent in the Monetary Policy Committee meeting at the end of the financial year 2022-23. 4 out of 6 members of the committee voted for the decision to increase the repo rate. With this new increase, the repo rate now stands at 6.50. Since May 2022, the repo rate has been increased six times. This increase is equal to 2.25. After this, home loans, car loans are going to be expensive. The direct impact of this will fall on the common man’s pocket.
What exactly is repo rate related to EMI?
It is common practice for banks to pass on the burden of interest rate hike to the customers instead of bearing it themselves. Should we bear the burden of interest rate hikes on how much banks profit? How much to bear? These lenders are determined by banks and financial institutions. As financial institutions with high amount of outstanding loans do not have strong balance sheets, the burden of interest rate hike is more likely to be pushed on you and your EMIs will increase.
Thus, an increase in interest rates by the RBI can directly increase your EMI or monthly installment of the loan and the financial math of the general public can become problematic.
What will be the effect on your bank fixed deposits?
Banks can also pay more interest on fixed deposits with banks after the repo rate increases. However, this decision depends on the Reserve Bank bank of india itself. From the observation so far, the experts said that after the repo rate, there is an immediate increase in the interest rate on the loans from the banks. However, the decision to increase the deposits and benefit the customers is often taken very late.
GDP and Inflation
As per Reserve Bank Governor’s opinion, the GDP growth rate for the current 2022-23 may be 7 percent. The GDP rate for April-June 2023 quarter could be 7.8. The GDP rate may remain at 6.4 in FY 2024. On the other hand, if inflation is considered, the inflation rate may go up to 6.5 in the current financial year 2022-23. The same rate may go up to 4 percent in the next financial year 2023-24. Decline in global demand and economic conditions may affect growth.