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During the last one year, the interest rates of loans in the country have increased rapidly. Banks have continuously increased interest rates with Repo Rate Hike. However, even after this the demand for loans has not reduced. According to statistics, during the financial year 2022-23, the rate of credit growth was higher than that of deposit growth. Not only this, but the rate of increase in debt has been the highest in the last 11 years.
The fastest growth came 11 years ago
This information has been revealed in the report of the recent Monetary Policy Committee meeting of the Reserve Bank (RBI MPC Meeting). According to the report, during the financial year 2022-23 i.e. April 2022 to March 2023, bank loans have increased at the rate of 14.6 percent. On the other hand, an increase in deposits was recorded at the rate of 9.6 per cent only. This increase in debt is the highest since the financial year 2011-12, when it had increased by 17 per cent.
Interest increasing since May last year
This sharp increase in the loan has happened at a time when the interest rates in the country have increased at a record pace. During the last one year, almost all the banks have increased the interest rates by 250 basis points i.e. up to 2.50 per cent. This is the fastest increase in interest rates during a single financial year. The Reserve Bank started raising interest rates after an emergency meeting in May last year. After that there was a continuous increase in interest rates, which stopped in this month’s meeting.
all loans have become so expensive
As the Reserve Bank increased the repo rate, the banks started passing on its effect to the customers. From May 2022 till now, all the banks have increased the interest rates in several phases. Statistics show that during May 2022 to March 2023, loans of almost all banks have become costlier by 2.50 per cent. Banks have also increased the External Benchmark Based Lending Rates i.e. EBLR according to the repo rate. At the same time, the Marginal Cost of Funds Based Lending Rate ie MCLR has increased by 1.40 per cent.
EBLR based loans have increased rapidly
Over the years, the share of EBLR based loans in the loan portfolio of banks has increased. The share of EBLR based loans in floating rate loans was 44 per cent at the end of March 2022, which increased to 48.3 per cent in December 2022. On the other hand, the share of MCLR based loans came down from 48.6 per cent to 46.1 per cent during this period.
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