By admin on September 26, 2022, Finance A nation’s Central Bank establishes the economic framework.
The rules and guidelines established by the central bank are followed by all lenders and financial institutions. The economy is looked at by the central bank every couple of years to see if their goals are being met.
The majority of these objectives have to do with controlling inflation. They plan and make amends to achieve their goal if the plan is off course.
The Reserve Bank of India (RBI) is the other name for the central bank in India. Bank policies are planned and predicted by the RBI. When they raised the repo rate by 25 basis points, they became known.
The repo rate has been raised by the RBI twice in the past four years. The rate is now 6.50%, 50 basis points higher than it was four years ago, when it was 6.00%.
What is the Repo Rate?
The rate at which the central bank lends money to commercial banks when they fail to maintain a suitable balance is known as a repo rate. The central bank (RBI) decides this balance. If a commercial bank is unable to keep such a balance, they can borrow the money at interest from the RBI.
The RBI increased the repo rate for a reason.
In order to meet their goal of keeping inflation around 4%, the RBI raised the rate. A series of things happen when this rate is raised. Because of the high repo rate, banks will borrow less money from the RBI. As a result, they won’t have enough money to lend to the customer. The remaining funds will be loaned at a higher interest rate. As a result, a lot of customers won’t take out a loan, which will reduce demand. In the long run, this will bring down inflation.
Should this rate’s rise be cause for concern?
Yes. Commercial banks raise the interest rates on a variety of loans, including personal loans, home loans, and so on, when the RBI raises the repo rate. The customer is then affected by this because the EMI will go up with the interest rate. Yes, if your loan has a floating interest rate, the EMI will be adjusted in response to changes in the market and when the RBI raises the repo rate. As a result, the customer’s debt burden will now be greater than ever. Prepaying loans in full or in part might be a good idea as the amount of debt grows.
One such place is Ruloans, which can assist you with all of your home loan requirements. We provide our customers with solutions to all of their issues thanks to our decade of experience and dedication to the banking industry. We offer these services at no cost because we want to help customers borrow money.
