NEW DELHI : RBI has increased the repo rate. The repo rate has been increased by 0.50%. After this decision, there is going to be a lot of impact on the pockets of the common man. Because now taking loan has become expensive. Due to this, EMI will also have to be paid more. If you have already taken a loan, your EMI will not increase. If you have already taken a flexible loan, then your EMI may increase.
Repo rate is the rate at which banks get loans from RBI. On the other hand, the reverse repo rate is called the rate at which RBI pays interest to banks on keeping money. Right now it is 3.35%. When RBI reduces the repo rate, the banks also reduce the interest rates for the customers. This also reduces EMI. Similarly, when the repo rate is increased, the interest rates also increase. In such a situation, customers have to take a loan at an expensive rate.
Let us understand this with an example. Let’s say Ajay has taken a house loan. He has taken a loan of 30 lakhs for 20 years at the rate of 7.55%. The EMI of the loan is Rs 24,260. In 20 years Ajay will have to pay interest of Rs 28,22,304 at this rate. That is, he will have to pay a total of Rs 58,22,304 instead of 30 lakhs.
At the same time, RBI increases the repo rate by 0.50%. At the same time, when a friend of Ajay comes to take a loan, the bank gives him a loan at the rate of 7.55%. Whereas he too has taken a loan of only 30 lakhs. But now his EMI is made of Rs 25,187. That is, Rs 927 more than Ajay’s EMI will have to be given to his friend. Due to this, Ajay’s friend will have to pay a total of Rs 60,44,793 in 20 years. This amount is 2,22,489 more than Ajay’s amount. This is definitely a loss-making deal for the borrowers.
Please inform that there are 2 types of home loan interest rates first floater and second flexible. Your interest rate remains the same in the floater category. Until you repay that loan, you will have to pay the same EMI. It has nothing to do with increasing or decreasing the repo rate. On the other hand, if you have taken a loan in the flexible category, then you will definitely have the effect of increasing the repo rate on the loan. This will increase your earlier EMI.