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With inflation remaining at double-digit levels for six weeks running, RBI decided on Tuesday to further tighten its monetary policy.
The measures will squeeze liquidity and push interest rates upwards - for you it means EMIs on loans, whether for housing, car or other purposes, are likely to get still higher. The move is also likely to hit demand in the economy, which could dampen the growth momentum.
The central bank has increased the rate at which it lends short-term funds to banks - the repo rate - by half a percentage point and the proportion of deposits the banks have to set aside in cash - the cash reserve ratio (CRR) - by 0.25 percentage points.
A half percentage point increase in housing, car and personal loan interest rates seems on the cards. This would be the third time in 2008 that rates have been moved up and the second time in this month. Earlier this month, banks had increased lending rates by 0.5 to 0.75 percentage points.
In 2008, interest rates on home loans have already gone up by around one percentage point. Include the rise in the interest rate due to Tuesday's measure and the total hike will be 1.5 percentage points. On a 20-year loan of Rs 50 lakh that translates into an increase in EMI of over Rs 5,250.
In fact, the interest rate on home loan has gone up by almost 75% from 7% in 2004 to 12.5% at present. This sharp hike in interest rates by 5.5% has led to increase in the EMI by around 50% over these last four years, causing a
huge burden for the salaried middle class.
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The measures will squeeze liquidity and push interest rates upwards - for you it means EMIs on loans, whether for housing, car or other purposes, are likely to get still higher. The move is also likely to hit demand in the economy, which could dampen the growth momentum.
The central bank has increased the rate at which it lends short-term funds to banks - the repo rate - by half a percentage point and the proportion of deposits the banks have to set aside in cash - the cash reserve ratio (CRR) - by 0.25 percentage points.
A half percentage point increase in housing, car and personal loan interest rates seems on the cards. This would be the third time in 2008 that rates have been moved up and the second time in this month. Earlier this month, banks had increased lending rates by 0.5 to 0.75 percentage points.
In 2008, interest rates on home loans have already gone up by around one percentage point. Include the rise in the interest rate due to Tuesday's measure and the total hike will be 1.5 percentage points. On a 20-year loan of Rs 50 lakh that translates into an increase in EMI of over Rs 5,250.
In fact, the interest rate on home loan has gone up by almost 75% from 7% in 2004 to 12.5% at present. This sharp hike in interest rates by 5.5% has led to increase in the EMI by around 50% over these last four years, causing a
huge burden for the salaried middle class.
Discuss
Add this link to...
Tell a friend
Bury
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