How can loan borrowers escape from RBI Repo rate hike..!?

In the monetary policy decisions published by the Reserve bank of india, the interest rate for loans to the public has been increased by 50 basis points and the repo rate has hiked from 5.4 percent to around 5.9 percent. In the last 5 months, the RBI has increased the interest rates 4 times to control the country's inflation and the fall in the value of the rupee. This increase in interest rate has become a huge burden for people who have been enjoying low-interest rates for more than the last 3 years. RBI is raising interest rates from May 4. What should borrowers do in this situation..? In just 93 days the RBI hiked the repo rate to around 1.40 percent, as on august 5. At the end of today's session, the repo rate rose by 50 basis points to 1.9 percent. As all the banks in india currently offer most of the loans only at the floating interest rate, when the bank management implements this interest rate hike, the interest rate and EMI amount of the borrowers will increase.As a result, the interest rate on all bank loans such as home loans, car loans, education loans, gold loans, personal loans, etc. will start increasing at low-interest rates. Also, since today's 0.50 percent interest rate will be implemented today, banks will start announcing interest rate hikes. The 1.40 percent interest rate hike announced in april 2022 has increased the home loan interest rate by 0.80 percent. That means it has been increased by more than 50 percent from the announced level. Thus, the home loan interest rate may go up by 25-30 basis points due to today's announcement. This will increase up to 0.50 percent for personal loans and car loans. While there are more chances for banks to postpone interest rate hikes due to the festive season, some banks are gearing up to announce interest rate hikes ahead of the festive season. But if big banks like SBI, HDFC, and ICICI announce the interest rate then all the banks will raise the interest immediately.If you have Rs 30 lakh outstanding on a 20-year home loan at 8.5% interest, your EMI amount will increase by Rs 957 from Rs 26,035 to Rs 26,992 with a projected 25-30 basis points interest rate hike. If the rate increases from 11 percent to 11.5%, the EMI amount will increase by Rs 211. With this, the monthly EMI amount will be from Rs.13,698 to Rs.13,909. In the personal loan category, which is availed by a large section of people in india, the interest rate is likely to increase from 15% to 15.5% for those who have a personal loan of Rs. 5 lakh for 5 years. This will increase the EMI amount by Rs 132 from Rs 11,895 to Rs 12,027.This interest rate will increase until inflation in india reaches the Reserve Bank's target of 6 percent and prevents further depreciation of the rupee. At present banks will not stop raising interest rates for excess returns. Hence, current borrowers should make installment payments to reduce the EMI burden. This means that if you repay a small part or a large part of the loan, the EMI amount will decrease. This will keep your purse from getting into a hole.

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Sowmiya Sriram

30/09/2022 01:48 PM