RBI Hikes Repo Rate: Home Loan, Auto and Personal Loans To Become Costlier

New Delhi: The Reserve Bank of India (RBI) has increased the repo rate by 0.25%. RBI Governor Shaktikanta Das made this announcement in the press conference on Wednesday. The repo rate has been hiked from 6.25% to 6.50%. 

This means everything from home loan to auto and personal loan will become costlier and people will have to pay higher EMI. This is the first meeting of the Monetary Policy Committee (MPC) of the RBI after Finance Minister inister Nirmala Sitharaman presented the budget on February 1.

Earlier in the meeting held in December, interest rates were increased from 5.90% to 6.25%.

Repo rate hiked by 2.50% since May 2022

Monetary Policy Committee meets every two months. RBI has increased the repo rate by 2.50% since May 2022, which means that taking your loan has also become costlier by 2.50%. 

After the RBI's latest repo rate hike, banks are expected to raise interest rate in retail loans. The home loan you were getting before May at 5.65% interest has now reached 8.15%.

Rise in bank interest rates will directly impact  the new loan borrowers and bank depositors. After the rise in repo rate, banks hike interest rate on their retail loans and after the loan interest rate hike, they usually increase tenure of the loan instead of monthly EMI.

Economic growth to slow down to 6.4%

Earlier, on Tuesday the RBI on Tuesday projected India's economic growth to slow down to 6.4 per cent in FY24 from 7 per cent in the current fiscal, citing risks from geo-political tension and tightening global financial condition. 

Announcing the bi-monthly monetary policy, Reserve Bank of India Governor Shaktikanta Das said the RBI's internal survey says manufacturing, services and infrastructure sector firms are optimistic of the business outlook. However, protracted geo-political tension, tightening global financial conditions and external demands continue as downside risks to the domestic outlook, he noted.

"The real GDP growth for 2023-24 is projected at 6.4 per cent," Das said. In 2023-24, the growth in the June and September quarter is projected at 7.8 per cent and 6.2 per cent, respectively. 

In the December and March quarter, the GDP growth is estimated at 6 per cent and 5.8 per cent, respectively.