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Expansion
Inflation is increasing continuously in the country and to keep it under control, the Reserve Bank of India (RBI) has again increased the repo rate by 0.50 percent. After this it has increased from 4.40 percent to 4.90 percent. An increase in the repo rate has a direct impact on the EMI of the loan and increases your expenses. From home loans to auto and personal loans, its impact will be seen on everyone.
Think of repo rate like this
First of all, let’s talk about the repo rate and know how it is related to loan and EMI. Actually, repo rate is the rate at which RBI lends to banks, whereas reverse repo rate is the rate at which RBI pays interest to banks on keeping money. A decrease in the repo rate reduces the EMI of the loan, while an increase in the repo rate makes the loan costlier. Let us inform here that on May 4, RBI had increased the repo rate by 0.40 percent and now it has decided to make the second major hike within 35 days. Since May 4, the repo rate has increased by 0.90 percent.
EMI burden will increase like this
How the loan will get costlier after the 50 basis points increase in the repo rate of RBI. It can be understood through an example. If a person takes a loan of 30 lakhs at the rate of 6.7 percent and its tenure is 20 years, then his EMI becomes Rs 22,721 per month, whereas after increasing the repo rate twice in these 35 days, now the loan rate has increased to 7.60 percent. But after the increase of first 40 basis points, it increased by Rs 718 per month and then after increasing by 50 basis points, it increased by Rs 912. Talking about some increase, the EMI increased by about Rs 1630 to Rs 24,351 in 35 days.
Change on loan of 10 to 50 lakhs
Now if a person has taken a loan of ten lakhs at an interest rate of 6.5 percent for 20 years of tenure and his EMI is currently Rs 7,456, then after the RBI’s decision on Wednesday, its interest rate will reach seven percent and The EMI will increase by Rs 297 and will increase to Rs 7,753 per month. Apart from this, if a loan of Rs 50 lakh is taken at the rate of 7.50 percent for 20 years, then after the increase it will be eight percent and the monthly EMI will increase by Rs 1542 to Rs 41,822 from Rs 40,280.
Inflation compelled RBI
RBI Governor Shaktikanta Das expressed his concern about inflation while announcing the decisions of the MPC meeting. Referring to the impact of the long-running war between Russia and Ukraine on the supply chain, he said that such a decision has been taken to check inflation. In addition, bond yields hit 7.5 per cent for the first time in four years. At the same time, the trend of increase in the price of crude continues.