Brace For Higher EMIs As RBI Announces Repo Rate Hike By 50bps After 40 bps Hike Last Month

After suddenly hiking the repo rate by 40 bps earlier last month in an off-cycle move, the RBI has again hiked the repo rate by 50 basis points today, with immediate effect.

Amid inflationary pressure, geopolitical tensions and market turbulence globally, the RBI governor Shaktikanta Das announced the decision today morning after the conclusion of the scheduled MPC meeting from 6-8 June 2022.

He also stated that the Monetary Policy Committee voted unanimously to hike the repo rate. The RBI statement also mentioned that the move is to ensure that inflation remains within the target going forward while supporting growth.

The policy repo rate now stands at 4.90%.

This hike in repo was already hinted at by the RBI governor recently when he had said in a media interview that the repo rate raise in June would be a "no-brainer."

Last month¡¯s sudden rate hike had left the stock market bleeding on 4th May 2022, with Sensex nosediving below the 56,000 mark and Nifty closing below 16,700.

Bank FD Rates & Loan EMIs To Rise

Many banks including SBI, HDFC, ICICI, Canara etc have already started raising their lending interest rates since last month¡¯s 40 bps repo rate hike by the RBI. Now, this 50 bps repo rate hike will further make the loan rates climb up, hence making your EMIs pinch more soon for both new and existing borrowers.

If you are planning on taking a loan, then you better do it soon if you are financially ready, as these back to back repo rate hikes amid inflationary pressure would keep making the EMIs climb up, with more rate hikes expected in coming months.

For existing borrowers, the EMI changes would not be immediate or sudden and are likely to reflect on the loan reset date when the lender reviews the lending rate of your loan.

As far as bank FDs are concerned, the repo rate hikes are expected to result in increasing FD rates. This is evident from the fact that after the 40bps repo rate hike last month, many banks have begun raising their FD rates such as ICICI Bank, Indian Bank, SBI and HDFC Bank. Depositors can expect further rate hikes in bank FD rates after this further repo rate hike of 50 bps.

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Also Read: Does It Make Sense To Invest Your Money In A FD Anymore?

Earlier Rate Hikes

Before that 40 bps rate hike last month, the repo rate was last changed in May 2020, when a 40 bps rate cut was announced after a 75 bps rate cut in March 2020. Since May 2020, the repo rate had remained unchanged until 4th May 2022. And the last repo rate hike was in August 2018 before the surprise hike last month.

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