If you want to take a loan then be careful! RBI can do something next month which can make loans more expensive

New Delhi: The Reserve Bank of India (RBI) is likely to raise its inflation forecast in the Monetary Policy Committee (MPC) meeting to be held next month and raise rates to check inflation. In such a situation, if the central bank increases the repo rate after consultation, it will mean that banks can also increase […]
 


If you want to take a loan then be careful!  RBI can do something next month which can make loans more expensive

New Delhi: The Reserve Bank of India (RBI) is likely to raise its inflation forecast in the Monetary Policy Committee (MPC) meeting to be held next month and raise rates to check inflation. In such a situation, if the central bank increases the repo rate after consultation, it will mean that banks can also increase the cost of lending, which will have a direct impact on the customers of the bank.

They will have to pay more interest on the loan. EMI will be expensive However, it is for the banks to decide whether they will make the loan more expensive or not. The meeting of the MPC, chaired by the RBI governor, is to be held from June 6 to 8. The central bank is trying to keep retail inflation in the range of 2-6 per cent.

Sources said the MPC will review the inflation situation in its next meeting. The MPC did not change its inflation projections at an off-cycle meeting earlier this month. However, due to geopolitical tensions, the Reserve Bank last month raised its inflation forecast for the current fiscal to 5.7 per cent from 4.5 per cent.

The RBI had said that the inflation rate is estimated to be 5.7 percent in 2022-23. “Inflation is expected to be 6.3 per cent in the first quarter, 5.8 per cent in the second quarter, 5.4 per cent in the quarter and 5.1 per cent in the fourth quarter,” the central bank said in a statement. The RBI had cited geopolitics and crude oil prices to boost inflation forecasts.

On the rate hike in the upcoming MPC meeting, sources said, it is expected but will depend on individual inputs. Importantly, after its off-cycle MPC meeting from May 2 to 4, the Reserve Bank announced a hike in the key repo rate (at which it lends to banks for a short period of time). The REPA rate has been increased by 0.40 per cent to 4.40 per cent. This is the first increase since August 2018. Not only this, this was the highest increase in the last 11 years.

When asked whether the central government has asked the RBI to reduce production, sources said the government will always demand lower returns but the central bank as a debt manager has to consider several other factors as well.