How will RBI's hike of 50 basis points to repo rate impact EMI and investments? Experts share their views

On Friday, RBI governor Shaktikanta Das announced that the benchmark repo rate has been raised to 5.9 per cent.

The Reserve Bank of India (RBI) on Friday announced a hike of 50 basis points to the benchmark repo rate, pushing the key lending rate to 5.9 per cent. After this, banks are likely to raise their respective interest rates on various deposit schemes.

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Banks are expected to hike interest rate in retail loans as well. Therefore, it becomes important for you to understand how RBI's decision will impact your monthly EMI and savings.

Mint, Hindustan Times' sister publication, spoke to experts about this. Here's what they said:

Jitendra Solanki, tax and investment expert: “This is a welcome move for a depositor, which it may not be for a loan borrower. However, it has been seen that banks generally increase lending rates after the repo rate hike but they don't follow this when it comes to the annual return they offer on their saving schemes. Account holders should therefore be vigilant about their fresh investments and fresh loans and the interest rates.”

Pankaj Mathpal, MD & CEO, Optima Money Managers: “It's true that the hike in rates by banks will have a direct impact on new loan borrowers and bank depositors. However, it's not true that it won't impact existing loan borrowers. For increasing the monthly EMI, banks need to sign fresh agreement with the loan account holders whereas they can increase loan tenure without any fresh agreement.”

Cyrus Mody, Founder and Managing Partner, Viceroy Properties LLP: “This is the fourth straight hike, and will to a rise in the EMIs for homeowners as interest rates have cumulatively risen by 190 bps. However, a silver lining is that in spite of the rise, we are seeing demand for housing. We expect demand for larger homes and high-quality real estate projects to stay intact despite the rate or price rises.”

(The views and recommendations are those of individual analysts, and not of HT or Mint.)