Reserve Bank of India (RBI) raised the repo rate that is directly going to affect the home loan costs. The RBI announces this during its bi-monthly monetary policy review. This makes the present repo rate of India to be 6.50 per cent. The Central Bank of India has lifted the repo rate by 25 basis points following which RBI raised it too. This is hike in repo rate will lead to the rise in home loan making adding inconvenience to the borrowers.
Repo rate is the rate at which the commercial banks borrow money from the Reserve bank of India in any situation if they fall short of funds. For this the commercial banks take funds from Central Bank of India by buying government securities with a legal agreement to repurchase the securities at the pre-decided price on the decided date. So far the Reserve Bank of India has raised the repo rate to 50 bps in the last two meetings of Monetary Policy Committee.
It is suggested to hurry up, if you intent to take a home loan, as the banks have already started to increase the interest rates for loans. Few banks including State Bank of India (SBI) and ICICI Bank raised its Marginal Cost of Funds based Lending Rate two days before the Monetary Policy Committee meeting. Further banks are likely to increase the interest rates.