Due to the Russia-Ukraine war, the Reserve Bank has taken a big decision in view of the rising commodity prices in India including the world. The Reserve Bank of India on Wednesday raised interest rates after nearly four and a half years. The Reserve Bank Governor said that the repo rate has been increased by 0.4 percent with immediate effect, while the cash reserve ratio (CRR) has been increased by half a percent. This increase will be effective from May 21.
EMI on loan will increase
In the opinion of experts, after this move of RBI, EMI on all types of loans will increase. The Reserve Bank has taken this step mainly to check rising inflation. Retail inflation had remained consistently above 6 per cent for the past three months, well above the RBI’s target range.
Milk and oil prices may increase, inflation will haunt more
The responsibility of the RBI has been given to maintain the inflation rate around four per cent, which can increase or decrease by two per cent. Reserve Bank Governor Shaktikanta Das said that the monetary stance is still soft and the measures taken during the pandemic will be withdrawn after due consideration. According to him, the Indian economy is in a better position than before to face external shocks.
Why this step had to be taken all of a sudden
Seeing inflation going beyond the prescribed limit, RBI has to take this step. In this meeting, the inflation situation was discussed and it was decided to focus on gradual withdrawal of the accommodative stance to keep inflation within the target range. At the same time, due to the volatility in global commodity prices due to the ongoing war between Russia-Ukraine, the effect has started showing in the country as well.
Everyone’s EMI will increase
The Monetary Policy Committee of the Reserve Bank of India has taken this decision without any fixed schedule in the meeting held on May 2 and 4. This decision marks the first increase in policy rates since August 2018. After this decision, the cost of borrowing will increase not only for the corporate but also for the general public. This will increase the EMI of all types of loans including housing, car, and personal loans.
EMI will increase so much
Loan amount Rs 30 lakh
Duration 20 years
Current interest rate 6.8 percent
Existing Monthly Installment Rs.22,900
New interest rate 7.2 percent
New Monthly Installment Rs 23,620
Installment hike Rs 720