Your loans to get costlier; RBI set to hike rates

Posted on    24 October 2011


The Reserve Bank of India is expected to raise interest rates in its mid-year monetary policy review on Tuesday — the 13th time in 19 months —to cool inflation that has remained stubbornly high during the past few months.


For consumers reeling under the high prices of most goods, this could possibly dampen Diwali celebrations.


If the RBI announces the hike, equated monthly installments or EMIs on home loans will go up further.  “We expect the RBI to raise the repo rate by about 0.25 percentage points,” a chief executive of a public sector bank told HT. Last month, the RBI had increased the repo rate by 0.25 percentage points to 8.25%.


A higher repo —the rate at which the RBI lends to banks —raises banks’ borrowing costs, prompting them to increase interest rates for home, auto and corporate borrowers.


India’s inflation rate in September accelerated to 9.72%, driven by costlier manufactured goods and food items.


“There are no signs that it (RBI) will change its stance on tightening the monetary policy. It is still focussed on controlling inflation but hasn’t succeeded so far,” Harshpati Singhania, managing director of JK Paper Ltd told HT.


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