Monday, February 6th, 2023

RBI Repo Rate: Inflation with RBI will break the back, Reserve Bank has increased the repo rate for the fifth time in a row, home car loans will be expensive

Photo: File RBI

If your shoulders are bent due to the increasing EMI of home loan and car loan, then strengthen your shoulders even more. The Reserve Bank of India (RBI) has increased the key interest rate i.e. Repo Rate for the fifth consecutive time since May. This will make all other loans costlier except your home and car loan. Today, in the meeting of the Monetary Policy Committee (MPC), Reserve Bank Governor Shaktikanta Das (RBI Governor Shaktikanta Das) has announced an increase of 35 basis points in the repo rate. With this, now the repo rate has increased to 6.25 percent.

To control rising inflation, the Reserve Bank had increased interest rates in May. After this, including June, August, September and now December, the Reserve Bank has interest rates has increased by 2.25 percent. According to the Reserve Bank Governor, RBI has increased the repo rate to reduce inflation. With the increase in the repo rate, all types of loans, including home loans, will become costlier. But those investing in Fixed Deposit (FD) will benefit.

Reserve Bank reduced growth forecast

RBI Governor Shaktikanta Das in a press conference on Wednesday M.P.C. informed about the decisions taken in the meeting. The central bank has reduced the GDP growth forecast for the financial year 2022-23 to 6.8 percent. In the last policy statement on 30 September, it was estimated to be seven percent.

How many times the interest rate increased this year

  • May – 0.4 %
  • June 8 -0.5 %
  • August 5 – 0.5%
  • September 30 – 0.5 %
  • December 7 – 0.35 %

Know how much home loan rates will increase

Home loan borrowers were apprehensive before the RBI’s decision, their apprehensions came true when the repo rate was increased by 0.35 basis points. Now that the Reserve Bank has announced an increase in the interest rates, it is now believed that the major banks of the country will also increase the interest rates today or tomorrow. After the last hike, the average home loan rate in the country had come down to around 8 per cent. In such a situation, the rates can now reach 8.5 percent.

The burden will also increase on personal and credit card loans

The increase in the repo rate will also increase your personal and credit card loan EMIs in the coming days. In fact, banks will increase the interest rate on their loans as well. In such a situation, there is no hope of getting relief from anywhere.

FD customers will benefit

If you do not have any loan on your head, then you can rejoice as the possibility of an increase in the rates of fixed deposits has increased after the increase in the repa rates of the Reserve Bank. Almost all banks have increased FD rates since June. Currently, banks are paying interest on FDs at the rate of around 5.5 percent. In such a situation, your chances of getting good returns have also increased.

Repo Rate

Repo rate can be understood in simple language like this. Banks give us loans and we have to pay interest on that loan. Similarly, banks also require huge amount of money for their day-to-day operations and they take loan from Reserve Bank of India (RBI). The rate at which the Reserve Bank charges interest on this loan is called the repo rate.

What is the effect of repo rate on common man

When loans are available to banks at a low interest rate i.e. the repo rate is low, then they can also give cheap loans to their customers. And if the Reserve Bank increases the repo rate, it will become costlier for banks to take loans and they will make loans costlier for their customers.

Reverse Repo Rate

It is opposite to the repo rate. When a large amount of money is left with the banks after a day’s work, they keep that amount in the Reserve Bank. RBI gives them interest on this amount. The rate at which the Reserve Bank gives interest on this amount is called reverse repo rate.

This is how reverse repo rate affects the common man

Whenever there is too much cash in the markets, the RBI increases the reverse repo rate, so that banks deposit their money with it to earn more interest. In this way, less money will be left in the possession of the banks to release in the market.

Know what is Cash Reserve Ratio (CRR)

Under banking rules, every bank has to keep a certain part of its total cash reserve with the Reserve Bank, which is called Cash Reserve Ratio or Cash Reserve Ratio (CRR). These rules have been made so that if at any time a large number of depositors in any bank need to withdraw money, the bank cannot refuse to pay the money.

This is how CRR affects the common man

If the CRR increases, banks will have to keep a larger portion with the Reserve Bank and will be left with less money to lend. That means banks will have less money to give loans to the common man. If the Reserve Bank reduces the CRR, then the flow of cash in the market increases.

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