Loan Instalments Are Increasing

Reserve Bank increased interest again. 35 basis points in this round. As a result, the monthly instalments of common people are going to increase. Especially home loans. A group of lenders including Bank of India, and HDFC Bank announced the rate hike on Wednesday night.

On top of that, the push for instalments or EMI hikes may not end here, it was also clear on Wednesday. The apex bank has indicated that it will pave the way for more interest rates (repo rate, the rate at which the RBI lends to banks) in the future in the day’s credit policy announcement because the crisis in the global economy remains and inflation is brought down to the tolerance limit (6%). 

Role of RBI 

Loan Instalments
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The RBI has also cut India’s economic growth forecast for the current financial year to 6.8% from 7%. Governor Shaktikanta Das’s message, India has left the era of steep price hikes behind. However, the risk of a global market shock remains. However, they have kept the price increase forecast at 6.7 per cent.

The Reserve Bank has hiked interest rates 5 times since May, totalling 225 basis points, to curb inflation. Financial expert Anirban Dutta says that banks and financial institutions are also raising interest rates. EMI burden has gone up a lot. This time the rate of increase in interest will be lower, but the cost of the borrower will increase. As an example, he says, monthly instalments are now Rs 871 for every Rs 1 lakh loan taken for a period of twenty years at an 8.55% interest rate. 

Statement from financial expert

He claims, “A section of the general middle class is in trouble from all sides. The price of all the necessary things has increased. If one has an EMI liability on top of that, then it is practically difficult to run it.” Note that when the repo increases, banks increase the interest on all types of loans. But in some cases, including home loans and micro, small and medium enterprises, the loan interest is directly linked to it. As a result, when the repo increases, the Interest increases.

However, economist Abhirup Sarkar is sceptical about how much the price increase can be curbed. He said, “The root cause of price increase in the country is a supply shortage. Therefore, it would have worked if the price of oil had been reduced a little without increasing the interest rate. It would have reduced the price increase. However, the adverse effect of increasing the interest rate on financial growth could have been avoided.” Anirban laments, “High-interest rates are increasing the cost of raising capital for industry. It is hampering expansion in the industry. It is a hindrance in the way of employment.”

The question is whether the interest will increase further. Shaktikanta did not comment. Just said, “We have passed the worst day in terms of the price increase. Hopefully this time the rate will decrease a little. But the war against price increase is not over yet.”