Loan interest rates, EMIs to rise? Two back-to-back 25 bps repo rate hike from RBI soon?
Analysts expect the Reserve Bank of India to hike the benchmark interest rate by 25 basis points in both October and December. This projection is primarily driven by persistently rising crude oil prices and inflationary pressures within the economy. Such rate increases would directly impact borrowers through higher loan interest rates and EMIs, while also potentially affecting returns for depositors.
What this means
Anticipated repo rate hikes suggest the RBI is prioritizing inflation control amidst rising commodity prices. This will lead to an increase in lending rates across retail and corporate segments, impacting credit demand and potentially improving banks' Net Interest Margins, albeit with associated asset quality risks if borrowers struggle.
Most affected: Commercial banks, Borrowers, Depositors
Key takeaway: Prepare for potential upward revisions in lending and deposit rates following the next MPC meetings, and assess the impact on your balance sheet and customer segments.
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