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RBI MPC June 2023 Meeting: The beginning of the financial year 2023-24 has brought relief news for the people. Today, there was no change in the repo rate in the meeting of the Monetary Policy Committee (MPC) of the Reserve Bank of India. In such a situation, the repo rate of RBI remains stable at 6.5 percent (RBI Repo Rate). This decision has brought news of relief for home loan borrowers. Home loan buyers have seen a huge increase in home loan interest rates in the last 10 months from May 2022 to April 2023. Due to this, the additional burden of EMI has increased on the customers. In this, the question arises that the stability of monetary policy for two consecutive times in April and June is an indication that whether RBI can cut its repo rate soon?
Bad effect of increase in interest rates
Significantly, as RBI has increased its repo rate, banks have also increased their Marginal Cost of Lending Rates and Benchmark Lending Rates. This has directly affected the EMI of the customers. For example, if you have taken a loan of Rs 40 lakh from a bank for 20 years, its interest rate was 7 percent, then after the increase in the repo rate, this rate would have become 9.5 percent. In such a situation, instead of Rs 34.4 lakh, you will have to pay a fee of Rs 49.48 lakh as interest rate on this loan. In such a situation, there has been a tremendous increase of up to 44 percent in your total interest payable. On the other hand, if you extend this loan for 30 years instead of 20 due to the burden of increasing EMI, then you will have to pay Rs 81.08 lakh as interest. In this case, your total interest payable will increase by up to 136 percent. For this reason, experts advise people to pay more EMI instead of increasing the tenure.
Will RBI reduce the repo rate?
The Reserve Bank has increased the repo rate by a full 2.50 per cent in the last one year. Inflation is the main reason behind the strict stance adopted by RBI. The Reserve Bank is trying to keep the retail inflation rate between 2 and 6 percent. In April 2022, the retail inflation rate in the country had reached 7.79 percent. In such a situation, the Reserve Bank has continuously increased the repo rate after this. In April 2023, the country’s retail inflation rate has come down to 4.7 percent. In such a situation, this is the lowest inflation figure in 18 months. RBI estimates that this rate may fall to 4 by May 2023. At the same time, in the financial year 2023, the central bank estimates that the inflation rate is likely to be 5.1 percent. In such a situation, experts believe that in the coming days, RBI may not consider increasing the repo rate, but to reduce it, it will keep a close watch on the inflation figures. Whether the rates of repo rate will be reduced or not, it will depend only on the rate of retail inflation in the country in the future.
What will be the impact on home loan buyers?
The stability in the repo rate is certainly very good news for the buyers. This will give them relief from the burden of rising interest rate. The thing to note is that the interest rate is not in the hands of any buyer, but if the EMI is increasing on your loan, then do not make the mistake of increasing your tenure to reduce it. Instead, pay more EMI as you will have to pay more interest on the loan.
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