NEW DELHI: Your cost of living has just gone up. And, it will continue to stay that way for quite some time, going by the Reserve Bank of India’s monetary policy statement released on Wednesday. According to RBI, the common man will continue to bear the brunt of price rise and high interest rates as the central bank’s fight against inflation is not over yet.
Seeking to cool inflation, RBI governor Shaktikanta Das on Wednesday announced a 35 basis points increase in the benchmark interest rate. This, however, will trigger another round of hike in’ lending rates. Banks are expected to raise interest rates of home loans and other loans linked to the repo rate (at which RBI lends to banks). Home loan rates are already at 9 per cnet or more.
The burden on existing home loan borrowers could go up by Rs 950-1,200 per EMI for an outstanding loan of Rs 50 lakh with a tenure of 10-25 years. Loans will become even costlier in the coming months as RBI has dropped enough hints that the rate hikes are far from over. Experts see another 25 bps rate hike in the next revision. Realtors say any further hike could derail the recovery in the property market as it will make the affordable housing segment unaffordable.
On the bright side, there is hope for savers as banks are likely to raise deposit rates. Inflation will, however, continue to pinch the common man as RBI has retained its inflation target for FY23 at 6.7 per cent, with Q3 inflation at 6.6% and Q4 inflation at 5.9%, which is still higher than its upper tolerance level of 6 per cent.
Considering that high inflation and interest rates are weighing the economy down, RBI has cut its FY23 GDP growth forecast to 6.8 per cent from its earlier projection of 7 per cent. The above factors, coupled with fears of a deepening global slowdown, portend uncertain days for the common man.
WHAT THE REPO RATE HIKE MEANS
- If you have taken a loan, or are planning to take one, you may have to shell out more as banks are likely to raise interest rates
- Parallelly, interest rates on deposits in banks are also expected to rise
- Experts feel the real estate sector is among the most hit as higher home loan rates could put off potential buyers