Home Loans may become Costlier as RBI raises Repo Rate

June 13, 2008	(1 votes, average: 3 out of 5)  Loading ...
Print This Story   Email This Story Subscribe Newsletter

Consumer, home loan, auto and other loans could become costlier with the Reserve Bank today hiking its short-term lending rate to banks by 0.25 per cent to 8 per cent in the face of surging inflation.

Announcing the increase from 7.75 per cent, the central bank said the decision was taken to contain inflationary expectations as the rate of rise in prices touched a 45-month high of 8.24 per cent.

The inflation, analysts said, is expected to climb over nine per cent once hike in petroleum prices gets reflected in the official wholesale price index.

The move to increase repo rate, at which the central bank gives short term money to banks in exchange of government securities, has been taken for first time this fiscal.

It had earlier been trying to contain inflation by raising cash reserve ratio– the mandatory deposits that banks keep with RBI.

Commenting on RBI decision Punjab National Bank Chairman K C Chakrabarty said, “All interest rates would be affected. We will take decision by month end. It (the move) will increase the cost of resources.”

Country’s largest lender SBI said it would examine lending and deposit rates on Friday.

Real estate company Unitech said home loan rates may rise after the Reserve Bank’s step.

The reverse repo rate, at which RBI borrows money from banks in exchange of the government papers, however, remained intact at six per cent.

HDFC Bank Chief Economist Abheek Barua said,” This (repo rate hike) will have an implication on the bank’s lending rates. I think the Prime Lending Rates of the banks will go up by about 50 basis points. There would also be a revision of bank’s deposit rates.”

News Published Under:   Real Estate India, Banking and Finance, Home Loans |

Comments