The Reserve Bank of India (RBI) has raised the repo rate by 25 basis points to 5.5%. This could increase borrowing costs for people with floating-rate home and vehicle loans.
The impact will mainly depend on the benchmark linked to the loan. Banks may increase the EMI or extend the loan tenure after a rate change.
Take a ₹50 lakh home loan for 30 years. If the interest rate goes from 7.25% to 7.50%, the EMI rises from around ₹34,109 to ₹34,961. That is about ₹852 more every month.
If the rate moves from 7.75% to 8%, the EMI on the same ₹50 lakh, 30-year loan rises from around ₹35,821 to ₹36,688, an increase of about ₹867 a month.
The monthly increase may look small, but it can add up over a long loan period. The actual impact will depend on the outstanding loan amount and remaining tenure.
Home loan borrowers should first check whether their loan has a floating interest rate and which benchmark it is linked to.
After a rate revision, check your loan account to see whether the bank has changed your EMI or loan tenure. You can also ask the bank for an updated repayment schedule.
The above EMI figures are only examples. A 25-basis-point repo rate hike does not automatically mean every bank will increase its lending rate by the same amount. The actual change depends on the lender, benchmark, loan terms and remaining tenure.
