Policy rate hike may affect EMIs of loans

Like experts predicted, the rate hike slowed down to 35 bps in December from 50 bps in October. The question remains that whether this would affect the general public in any way. The citizens who take loans from banks will be affected by the hike if the lender decides to raise their benchmark lending rates.

The policy repo rate is as of now at 6.25 per cent. Consequently, the standing deposit facility (SDF) rate stands adjusted to 6 per cent, and the marginal standing facility (MSF) rate and the bank rate to 6.50 per cent.

SDF is a monetary tool that allows banks to park their access liquidity with the Reserve Bank of India (RBI) without any collateral. MSF is a provision made by the RBI through which scheduled commercial banks can obtain liquidity overnight if inter-bank liquidity completely dries up.

Lending rates of banks are expected to go up as the cost of funds is expected to rise further. EMIs on vehicle, home and personal loans will also rise. The external benchmark linked lending rate (EBLR) of banks will rise by 35 bps as such loans are linked to the repo rate. The banks hadn’t announced a hike in their lending rates for the time being since the rate hike was announced.

As of now, HDFC Bank’s retail prime lending rate is 17.95 per cent. Its rates are 8.60-9.10 per cent for women salaried borrowers on home loans up to Rs 30 lakh, the rate is between 8.60-9.10 per cent for self-employed. For others, the rate is 8.65-9.15 per cent if the borrower is salaried and 8.65-9.15 per cent if they are self-employed. (ANI)