RBI increases rates, but EMIs safe for now

The RBI raised key policy rates on Tuesday to sustain pressure to control inflation, but your equated monthly installments (EMI) on home or car loans may not go up, at least immediately.

The RBI raised key policy rates on Tuesday to sustain pressure to control inflation, but your equated monthly installments (EMI) on home or car loans may not go up, at least immediately.

HT Image

The RBI upped the repo, the rate at which it lends to banks, and the reverse repo, at which it takes deposits from them, by 0.25 percentage points each to 6.25% and 5.25%, respectively. Though this raises costs for banks, most of them said they would not pass the hike on to their borrowers.

“It won’t have an immediate impact on pricing of loans as we will wait to see if our deposit costs go up,” Arun Kaul, CMD, UCO Bank, told HT. ICICI Bank, HDFC Bank and State Bank of India too said they planned no hikes for now.

However, on some earlier occasions, following similar tightening by the RBI, banks had initially assured their lending rates would not change only to quietly raise them later.

Finance minister Pranab Mukherjee said the RBI decision was in the right direction. He admitted, however, it could have a “small negative impact” on growth rate.

Inflation, at 8.62 %, has shown signs of cooling but food inflation (13.75%) is a lingering worry.