RBI Raises Repo Rate, Home Loan EMIs Set to Rise

The Reserve Bank of India has announced a 25-basis-point increase in the repo rate following the Monetary Policy Committee meeting held from October 5 to 7. With the latest decision, the repo rate has moved up to 5.5%. The move is significant for borrowers because changes in the policy rate can influence the interest rates charged on loans linked to external benchmarks.

The impact is expected to be more noticeable for borrowers with floating-rate home and vehicle loans linked to the repo rate. If banks pass on the increase by raising their benchmark lending rates, borrowers could face higher interest costs and increased EMIs. Existing as well as prospective borrowers may therefore need to reassess their loan repayment burden following the RBI’s latest decision.