Impact of RBI rate hike, Policy Rates raised by 25bps | August 2


ONAD-The Monetary Policy Committee (MPC) of Reserve Bank of India (RBI) raised policy rates by 25 basis point

? Cool Title, but what’s the news?

The Monetary Policy Committee (MPC) of Reserve Bank of India (RBI) raised policy rates by 25 basis point, the first back-to-back hike since October 2013.

? Okay, but what does it mean?

Now, the repo-rate stands at 6.5 percent from 6.25 percent earlier. This increase in repo rates will increase the bank’s cost of funds, which might force them to hike their MCLR.

? Why should I care?

In a rising rate scenario, it makes immense sense for customers repaying loans to make periodic principal pre-payments. Home loans will become costlier for fresh borrowers as and when the banks raise their respective MCLRs.

Source: Moneycontrol


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Written by

Vedant Kaushik