RBI raises Repo and Reverse repo Rates by 25 bps – Home Loan EMIs likely to move up!

In its mid-quarter monetary policy review, RBI has hiked interest rates for the 12th time in last 18 months. The country’s apex banker today hiked the repo rate and reverse repo rates by 0.25 percentage points to 8.25% and 7.25% respectively; making it almost as the longest rate hike cycle in a decade. CRR remains unchanged.

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Repo rate is the rate at which commercial banks borrow money from the RBI. An up tick in the repo rate translates in to higher borrowing costs for the Indian banks. On the other hand, higher reverse repo rates imply RBI’s willingness to borrow money at lucrative rate of interest, to suck in excess liquidity from the system.

Government has also hiked petrol prices from midnight to the extent of Rs.3.14 per litre. This makes it the year of hike – be it interest rate or basic fuel prices. Even equity markets have reacted negatively to this development of rate hike, as it directly impacts investment and growth prospects in the economy. Furthermore, even your home loan EMI’s are likely to go up, as this rate hike seeps in.

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