Home Loan EMIs

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Your Home Loan EMIs May Rise as Reserve Bank Hikes Rate

Home Loan EMIs

January 28, 2014 MUMBAI: On Tuesday, Reserve Bank of India raised policy rates by 25 basis points that could lead to some banks to increase interest rates on Home Loans

This surprise move may increase Home Loan EMIs. However, no bank has announced hike in interest rates yet. SBI and HDFC, India’s largest lenders, ruled out any immediate increase. The decision made by RBI will raise the cost for those banks that depends on money markets for funds and may force them to increase rates to maintain margins. 

The policy rate hike came despite lower inflation rate in December. India’s retail inflation rate grew at a three months low rate of 9.87 percent and the wholesale inflation rate eased to five-month low of 6.16 percent.

Chanda Kochhar, Managing Director, ICICI Bank said, “You should watch the trend in inflation and in deposits, which impact our cost of funds and, therefore, lending rates. So, you cannot say something very quickly till we see what we need to do to the deposit rates as well”.

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This move drew sharp reactions from business leaders who have been expecting a reduction in interest rates, arguing that costly borrowing and high cost of raw materials have crimped the expansion and hiring plans.

Siddhartha Birla, President of Industry Body FICCI, said, “At this juncture we need policy support from all directions to get the industrial sector back on track. We hope growth and employment considerations merit greater attention in RBI’s policy decisions in the coming months”.

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