New Delhi: It's bad news for those planning to take a loan. Car and home loans are likely to get even costlier with the Reserve Bank of India tightening noose around the banks.
RBI hiked cash reserve ratio, or CRR by 50 basis points, and the repo rates (the rate at which banks borrow from the central bank) to 7.75 per cent on Friday. Experts are of view that the impact of the RBI hike would be directly felt on the equated monthly installments (EMI) that are paid by the borrowers.
Banks will now have to slow down on credit giving while hiking the deposit rates. There is no way that banks can offer cheap loans to anybody.
Arun Shandilya, DMD and CFO of SBI said that the banks would have to review the interest rates because of the RBI decision. He further predicted the RBI move would “hit profitability of banks.” The largest public sector bank, SBI, also sees the current rate hike likely to impact credit growth.
However, the hike comes as a relief for people who rely on savings. Interest rates on fixed deposits and savings accounts are likely to go up. Banks are already offering rates 9.5-10 per cent interest on deposits above one year. Rates will soon touch 10-10.5 per cent for deposits up to three-years.
Home loan rates are expected to shoot up by around 0.5 per cent. The largest player in home loans, ICICI Bank, plans to meet on Monday to decide on revising the home loan rates. HDFC, the other big lender, is likely to follow suit in due course.
The advice most personal finance advisers are giving home loan borrowers, is to prepay a part of the loan to bring down the EMI.
With inputs from moneycontrol.com
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