Latest News! FD & Lending Rates Likely to Go Up as RBI Plans to Hike Repo Rate by 25 bps

According to experts, the Reserve Bank of India will likely boost its interest rate after the Union Budget 2023 by a modest 25 basis points (bps) to 6.50%.

The repo rate is currently 6.25%. At the February 8 meeting, 12 out of the 52 economists believe that there won't be any changes, despite 40 of them expecting the RBI to increase its benchmark repo rate by 25 basis points to 6.50%.

The monetary policy committee of the RBI will convene on February 6–8, and they will decide on the policy interest rate. Since May, the RBI has increased rates by a total of 2.25 percentage points, with the most recent increase being in December 2022 by 35 basis points.

How Will the Repo Rate Hike Affect Loan Borrowers?

Both fixed deposit and lending rates are likely to increase if the RBI raises the repo rate. Notably, since May, both private and public sector banks have actively increased their FD rates in accordance with the results of the RBI's policy decisions.

Borrowers would additionally be required to pay higher EMIs since banks and housing finance firms might increase their lending rates in response, which would increase your EMIs.

What is Repo Rate?

The interest rate at which the RBI loans banks short-term funding is known as the repo rate.

The banks will be required to set interest rates for various client types based on the MCLR for the unbanked (marginal cost of funds-based lending rate). Banks update the MCLR on a monthly basis while taking the repo rate and other lending rates into account.