Home, personal loan EMIs set to rise as RBI hikes repo rate for 6th in a row – Here’s the math behind it

New Delhi: In a move that will raise borrowing costs for corporates and individuals even further, the RBI Monetary Policy Committee led by Governor Shaktikanta Das hiked Repo Rate by 25 basis points to 6.5 percent on Wednesday.

Shaktikanta Das said that banks do not lend loans to a conglomerate on the basis of its market cap but on the strength and fundamentals of the companies when asked about the Adani-Hindenburg saga. Das explained the perception about Adani Group and the exposure of banks such as SBI is due to the conglomerate’s market cap.

He added appraisal methods of the banks have improved over the years. Earlier in the day, he said that the monetary policy committee (MPC) has hiked the repo rate by 25 basis points (bps) to 6.50 per cent and also withdrew its accommodative stance to tackle inflation. RBI also projected inflation to remain above the 4 per cent target and said that inflation is expected to average at 5.6 per cent in Q4 of 2023-24.

This is the first MPC meeting to be held after Finance Minister Nirmala Sitharaman presented the Union Budget 2023-24 in Parliament. The Monetary Policy Committee meeting was held between February 6 to February 8. The central bank also said that the GDP growth for 2023-24 is expected to remain at 6.4 per cent.

The six-member Monetary Policy Committee headed by Reserve Bank of India Governor Shaktikanta Das started deliberations on the bi-monthly policy review on Monday.

Governor Shaktikanta Das said that 4 out of 6 members of the Monetary Policy Committee voted in favour of the rate hike. After today’s decision, the stage is set for lenders to follow suit as the cost of funds is bound to rise.

Date	RBI Repo Rate
8 February, 2023	6.50%
7 December, 2022	6.25 %
0 September, 2022	5.90%
5 August, 2022	5.40%
8 June, 2022	4.90%
4 May, 2022	4.40%
9 October, 2020	4%

 

Let’s understand how the rate hike will impact your EMIs:

HOME LOAN

If you have borrowed a home loan of Rs 25 lakh at 8.25 per cent per annum for a tenure of 20 years and the interest is hiked to 8.50 per cent, your EMI will go up approximately by Rs 394 from Rs 21,302 to Rs 21,696. For Rs 50 lakh, the EMI will increase by Rs 788 from Rs 42,603 to Rs 43,391.

Home Loan	%	Tenure (Years)	EMI	Interest Payable
25,00,000	8.25	20	21,302	2,612,394
25,00,000	8.5	20	21,696	2,706,939
50,00,000	8.25	20	42,603	5,224,788
50,00,000	8.5	20	43,391	5,413,879
All value in Rs (approx)

 

CAR & BIKE LOAN

Likewise, if the interest rate is increased from 9% to 10% on an auto loan of Rs 7.50 lakh with a tenure of 7 years, the EMI will become costlier by Rs 400.

Car Loan	%	Tenure (Years)	EMI	Interest Payable
7,50,000	9	7	12,067	2,63,612
7,50,000	10	7	12,451	2,95,875
All value in Rs (approx)

 

PERSONAL LOAN 

Similarly, for a person who borrowed a personal loan of Rs 5 lakh at 13% per annum for a tenure of 5 years, the EMI, in case the interest rate is increased to 15%, would go up by Rs 518 from Rs 11,377 to Rs 11,895.