After increasing the repo rate, banks made home loans, vehicle and personal loans expensive

Pankaj Prasad
interest rate hike
interest rate hike

After the increase in the repo rate once again by the Reserve Bank of India, banks and other financial institutions have also immediately increased the interest rates.

After the increase in the repo rate once again by the Reserve Bank of India, banks and other financial institutions have also immediately increased the interest rates payable on their vehicle, housing and personal loans. Due to this all these loans have become expensive.

Private and government banks increased loan rates

Several banks and financial institutions including ICICI Bank, Bank of Baroda, Punjab National Bank (PNB), Bank of India, Indian Bank, Indian Overseas Bank and country's leading residential lender HDFC Ltd have announced hike in lending rates for their customers. Done in the last two days.

what is repo rate

At the repo rate, RBI gives loans to banks for their short-term borrowing needs. In this way, by increasing the repo rate, the finance from RBI becomes expensive for banks and then they also increase the interest rates on loans given to retail customers on their behalf.

RBI increased repo rate on June 8

RBI had announced a major hike in the repo rate by 0.50 percent in its bi-monthly monetary review on 8 June 2022. Earlier on May 4, 2022, RBI had suddenly increased the repo rate by 0.40 percent without any pre-determined plan.

Repo rate up to 4.90 percent

In this way, in a very short time, a total increase of 0.90 percent has been done in the repo rate. Now the repo rate is 4.90 percent. To deal with inflationary pressures, RBI has decided to increase the repo rate. Soon after, private sector ICICI Bank raised the repo-linked external standard lending rate (EBLR) from 8.10 percent to 8.60 percent.

Punjab National Bank hikes RLLR

Public sector Punjab National Bank has also increased the repo-linked lending rate (RLLR) to 7.40 percent from 6.90 percent earlier. Public sector Bank of Baroda has also increased the RLLR to 7.40 percent. Private sector HDFC Ltd has also increased its retail prime lending rate (RPLR) for housing loans by 0.50 percent.

RLLR increased

The country's largest bank State Bank of India revised its EBLR a few days before the announcement of monetary policy. Indian Bank has increased RLLR to 7.70 percent and Bank of India to 7.75 percent.

Chennai-based Indian Overseas Bank has also increased the RLLR to 7.75 percent. Pune-based Bank of Maharashtra has also increased the RLLR from 7.20 percent to 7.70 percent with immediate effect. Canara Bank had increased the one-year MCLR from 7.35 percent to 7.40 percent with effect from June 7.

Monetary policy adoption accelerated

Most consumer loans are linked to the one-year MCLR rate. The MCLR system came into effect from April 1, 2016. From October 1, 2019, all banks will have to lend only at an interest rate linked to an external benchmark such as the RBI's repo rate or treasury bill yields. Because of this, the pace of adoption of monetary policy by banks has increased rapidly.