August 10, 2022
RBI Repo Rate Hike: Reserve Bank increased the repo rate by 0.50%, know what will be its effect

RBI Repo Rate Hike: These days there is a ruckus in the country due to inflation. The low-income group, who constitute the largest number of people, have been affected the most due to the increased prices of commodities. They are also struggling to meet their daily needs. At the same time, the opposition is also on the streets against the government regarding this. In the midst of all this, the Reserve Bank of India has given another blow to the middle class.

After the three-day meeting of monetary policy, RBI Governor Shaktikanta Das appeared before the media and informed about the decision to increase the repo rate by 0.50%. After this hike, the repo rate has increased from 4.90 percent to 5.40 percent. Now its effect is going to be visible on the EMI of home loan, personal loan and auto loan. Now you have to pay more EMI.

Repo rate EMI connection

Repo rate is the rate at which banks get loans from the Reserve Bank. In this way, banks get costly loans from RBI when the repo rate increases. Due to which the bank also gives loans to the common people at an expensive rate. At the same time, when the RBI reduces the repo rate, the banks also reduce the interest rates. The Reserve Bank increases the repo rate so that the liquidity of cash in the market is reduced and inflation can be controlled. Due to less cash flow in the market, demand decreases, which also reduces inflation. Therefore, the repo rate is considered the most powerful tool of the Reserve Bank to fight inflation.

Will EMI increase on already running loans?

There are two types of interest rates, floater and flexible. In floater, the interest rate of your loan remains the same from beginning to end. There is no change in the rate rate on this. On the other hand, there is a difference in the repo rate when taking a flexible interest rate. If the repo rate is cheaper then your EMI will also become cheaper, but if the repo rate increases then your EMI will also become expensive. In such a situation, if you have taken a loan under the flexible interest rate, then after the latest decision of RBI, your EMI will increase.

RBI Governor Shaktikanta Das says that due to reduction in edible oil in the domestic market, good monsoon and moderation in global food prices, there may be relief on the inflation front in the coming days. However, there is no hope of relief from inflation at the moment.

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