RBI raises repo rate: How much your loan EMI will increase?

Reserve Bank of India (RBI) in its monetary policy meeting held on June 08, decided to increase the repo rate again by 0.5% to 4.9%. This hike comes within 36 days of last repo rate hike of 40 bps done on May 4, 2022. New borrowers and existing floating rate borrowers will have to shell out higher EMIs for their loans.

How much your loan EMI will increase?

After the current raise, the total hike in repo rate is 0.9%. Due the rate hikes by Reserve Bank of India, banks and housing finance will increase lending rates accordingly, which means that your EMIs will go up accordingly.

Now, for example, If you have a home loan with Rs 30 lakh outstanding with a balance tenure of 20 years at 7% per annum interest, your EMI will go up by Rs 1,648 from Rs 23,259 to Rs 24,907.

Likewise for an auto loan of Rs 8 lakh for a tenure of 7 years if the interest rate rises from 10% to 10.9% the increase in EMI will be Rs 375 from Rs 13,281 to Rs 13,656.

Whereas, on a personal loan of Rs 5 lakh with a tenure of 5 years, if the interest rate rises from 14% to 14.9% your EMI will increase by Rs 235 from Rs 11,634 to Rs 11.869.

In several instance, lenders rather than increasing the EMI amount prefer that the borrower opts to extend the tenure if there is scope. This usually occurs with home loans with shorter tenures. If the loan is taken for 15 or 20 years, lenders usually extend it to 20 or 25 years.

There is also another factor which determines if your loan will get tenure extension or not, how far you are from retirement. If the borrower has a long time left for retirement, then the lender will typically increase the tenure of the loan. For instance, if you have taken a home loan for 20 years when you are 35 years old, then the lender can increase the tenure up to 5 years so that it goes up to the usual retirement age of 60 years.