Breathe easy: Your EMIs aren’t likely to go up soon

Home loan borrowers, anxious about a possible hike in EMIs, may breathe easy. At least for the next few weeks. Mahua Venkatesh reports.

Home loan borrowers, anxious about a possible hike in EMIs, may breathe easy. At least for the next few weeks.

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Banks are unlikely to raise lending rates despite the Reserve Bank of India’s (RBI’s) decision to increase policy rates last month to cool prices.

“We will not increase the interest rates on home loans immediately, though our ALCO (asset liability committee) will meet and such issues would be taken up in the meetings,” said MD Mallya, chairman and managing director (CMD), Bank of Baroda.

At present, the home loan rates for Bank of Baroda ranges between 9.25% and 10.25%.

ALCOs of most of the banks will meet over the next week to decide on lending rates. A bank’s chairman or the CEO heads the ALCO comprising senior management and is responsible for balance sheet planning from risk-return perspective. It decides on interest rates of both deposits and loans depending on its liquidity position, anticipated deposit mobilisation and estimates of loan outgo among others.

Indian Bank CMD TM Bhasin said that the liquidity crunch has eased with year-end repayments coming in. “There is no liquidity crunch as the moment and there is enough cash in the system and keeping this in mind, we have decided not to go in for a hike in interest rate for home loans,” Bhasin said.

The RBI has raised key policy rates eight times in 2010-11 to tame runaway inflation. Wholesale prices based inflation rate for February stood at 8.3% as higher food and commodity prices knocked up prices of other goods.

Last month, RBI raised the repo and reverse repo rates by 0.25 percentage points each to 6.75 % and 5.75%, respectively. RBI will announce its annual credit policy early next month.