Business
RBI lifted repo from 4% to 6.5% by 2023
Hindustan Times··3d ago
From May 2022 to February 2023 the RBI raised repo by 2.5 percentage points from 4% to 6.5%, lifting floating home loan costs. Housing loans stood at ₹34 lakh crore in August, about 47% of bank retail books. NBFCs held another ₹8.6 lakh crore. Adhil Shetty said benchmark-linked loans reset at least quarterly, moving EMIs or tenure.
Prism
What It Means For You
- Floating-rate borrowers may see EMIs rise or tenures extend after each repo-linked reset.
- Loans tied to MCLR follow different reset cycles than repo-linked products.
- Processing fees, stamp duty and registration add to the cash cost beyond the EMI.
What's Happening
- The article followed a borrower who transferred a loan after rates jumped in 2023.
- Shetty said transmission to EMIs is not always immediate on benchmark-linked loans.
- MPC had shifted to calibrated tightening, limiting near-term rate-cut expectations.
Repo as the benchmark
- Repo is the rate at which the RBI lends short-term funds to commercial banks.
- A 25-basis-point move can add roughly a year of EMIs if tenure is extended.
- At 8% over 20 years, total interest can exceed the principal borrowed.
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