Your EMIs are set to go up
Interest rates and EMIs are set to go up again with the Reserve Bank today hiking its key rates by 25 basis points, the 12th time since March last year, to tame high inflation overlooking sliding growth.
Your EMIs on that car or home loan just got costlier. For the 12th time in 18 months, the Reserve Bank of India raised interest rates on Friday, setting the stage for all loans—home, auto, education or personal, to become costlier, raising the outgo on EMIs.
The RBI raised the key lending rates by 25 basis points, making it clear that it will continue with its anti-inflationary stance until price pressure eases, inspite of the impact on economic growth.
The repo rate (or the short-term lending rate at which banks borrow from the RBI) stands increased to 8.25 per cent.
The reverse repo rate (or short-term borrowing rate at which banks park their funds with the RBI) went up to 7.25 per cent.
All other policy rates, including the cash reserve ratio, remained unchanged.
Bankers Deccan Herald spoke to agreed that an interest rate hike by commercial banks is imminent and they hinted at making a call by the end of the month. “It will be a difficult decision in tough times,” said Bank of India CMD Alok K Misra.
Interestingly, the RBI’s last 11 moves to raise key rates to control inflation appear to make any impact as the rate of inflation continues to be very high and close to double digits. The RBI believes the global economic environment has worsened. It views the recent developments as a matter of “serious concern” and sees a downside risk to the July growth projection.
“The pace of exports is unlikely to sustain on weak demand,” it said and pointed out that GDP growth during the first quarter (April-June) of the 2011-12 financial year moderated to an 18-month low of 7.7 pc from 8.8 pc in the corresponding period a year ago, following a slowdown in industrial output growth during July to 3.3 pc, the lowest in 21 months.
