RBI to Hike Repo Rate: After Union Budget 2023, the Reserve Bank of India is expected to raise its interest rate by a modest 25 basis points (bps) to 6.50%, a Reuters poll of economists found. At present, the repo rate is at 6.25%. While 40 of 52 economists expected the RBI to raise its key repo rate by 25 bps to 6.50%, the remaining 12 predict there will be no change at the February 8 meeting.
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For the unversed, the RBI’s monetary policy committee is scheduled to meet on February 6-8 to decide on the policy interest rate. The RBI has so far hiked rates by 2.25 percentage points since May, with the latest 35 basis point hike in December 2022.
How Hike In Repo Rate Will Affect Loan Borrowers?
If RBI hikes the repo rate, both fixed deposits and lending rates are likely to go up. Notably, both private and public sector banks have been raising their FD rates aggressively in line with RBI’s policy outcomes since May.
Moreover, borrowers would have to pay higher EMIs as banks and housing finance companies may raise their lending rates in response, resulting in an addition in your EMIs.
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What Is Repo Rate?
The repo rate is the interest rate ar which the RBI lends short term funds to banks. For the unversed, the banks will have to fix interest rates for different types of customers on the basis of the MCLR (marginal cost of funds based lending rate). Taking into consideration the repo rate and other lending rates, banks revise the MCLR on a monthly basis.
