Business

Here’s how much your home or car will go up after the Rbi buyback rate hike


The Reserve Bank of India (RBI) raised the repo rate by 40 basis points in a surprise move to combat rising inflation. The Repo rate is the policy rate at which the RBI lends short-term funds to commercial banks.

This can be worrying for existing and potential borrowers of home and auto loans, as their interest rates and subsequent EMIs will increase. Under RBI rules, banks are required to link loan interest rates to an external benchmark, which is usually the RBI repo rate.

The final interest corresponds to the sum of the external reference rate + margin + risk premium. Therefore, a rise in the external benchmark or, in this case, the repo rate will also cause interest rates to rise. It also means that the deposit rates offered by banks should rise, bringing some relief to the common man.

Here are the details of how much EMI borrowers will have to pay as a result of the repo rate and the subsequent rise in interest on home loans.

For a home loan of Rs 30 lakh

Home loan amount (Rs) Assumed interest rate (pa) Presumed seniority (years) Existing EMI (Rs) New interest rate (after repo rate change) New EMI (Rs)
30,000,000 6.75 percent 20 22,811 7.15 percent 23,530

For a home loan of Rs 50 lakh

Home loan amount (Rs) Assumed interest rate (pa) Presumed seniority (years) Existing EMI (Rs) New interest rate (after repo rate change) New EMI (Rs)
50,000,000 6.75 percent 20 38,018 7.15 percent 39,216

For a home loan of Rs 1 crore

Home loan amount (Rs) Assumed interest rate (pa) Presumed seniority (years) Existing EMI (Rs) New interest rate (after repo rate change) New EMI (Rs)
1 crore 6.75 percent 20 76,036 7.15 percent 78,433

Here are the details of how much EMI borrowers will have to pay as a result of the repo rate and the subsequent rise in interest on car loans.

For a car loan of Rs 10 lakh

Car loan amount (Rs) Assumed interest rate (pa) Presumed seniority (years) Existing EMI (Rs) New interest rate (after repo rate change) New EMI (Rs)
10,000,000 7 percent 7 15,093 7.4% 15,289

For a car loan of Rs 20 lakh

Car loan amount (Rs) Assumed interest rate (pa) Presumed seniority (years) Existing EMI (Rs) New interest rate (after repo rate change) New EMI (Rs)
20,000,000 7 percent 7 30 185 7.4% 30,578

Note: The above calculations are based on assumed interest rates and tenures. Interest rates may vary from bank to bank, and the term may also vary depending on the loan policy.

First post: STI


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