EMIs to go costlier as RBI plans to hike repo rate by 35-50 Bps

All home, auto and personal loans are set to become costlier in coming days as the Reserve Bank of India (RBI) is reportedly mulling to increase the repo rate by 35-50 basis points (bps). 

For the unversed, this will be RBI's third consecutive policy rate hike to check elevated retail inflation. So far, the central bank had raised the short-term borrowing rate twice by 40 basis points in May and 50 basis points in June. 

 Notably, the existing repo rate of 4.9 per cent is still below the pre-Covid level of 5.15 per cent. 

The central bank sharply reduced the benchmark rate in 2020 to tide over the crisis created by the pandemic. 

Experts are of the view that the RBI would raise the benchmark rate to at least the pre-pandemic level this week and even further in later months.

If RBI hikes the repo rate, the outcome will have a direct impact on loan borrowers since banks and Non-Banking Financial Companies (NBFCs) are anticipated to raise lending rates. 

Borrowers would have to pay higher EMIs as banks and housing finance companies may raise their lending rates in response, resulting in an addition in your EMIs.