The India’s Central Bank may slowing the paced of the Interest –rate increases on Wednesday showing that it’s near the end of its tightening cycle. The monetary policy effects the nation, the monetary policy include each and every thing related to money that is the repo rates the reverse repo rates, the price of crude oil and etc.
The monetary policy also represents whether the inflation may increase or decrease, after the total of 190 basis points of rate increases this year, the six member monitory policy committee led by governor Shaktikanta Das has more than one reason to switch to smaller increment and that is the inflation is coming off a high and headwinds to economic growth are increasing. Twenty-nine out of 35 economists in a survey predict that the benchmark of the Reverse Repo Rate will be raised by 35 basis point but to know the actual result you need to stay tune as Das will announce the rate decision through a webcast at 10 am in Mumbai Wednesday, and will address a press conference at 12 pm.
The increase in repurchase rate (reverse repo rate) also effects on home loan interest as whenever the repo rate increase the price of home loan interest also increases which effect on the monthly EMI of the borrower. Whenever the repo rate gets high the banks interest rate that is the reverse repo rate also increase and because of the increase in the reverse repo rate the bank make a raise in the interest of the loan which effects the borrower.
Here, the bank make a smart move whenever they increase the loan interest they do not increase the EMI rather they increase the time period of that particular loan. But now due to many previous increases in the repo rate in this year, if on Dec7,2022 the repo rate will again increase then also there will be no further extension of home loan tenure as the home loan should be repaid before the age of 60 and due to prior increase in the loan period the people attaining the age of 60 is high so lastly if the repo rate increase the amount of home loan interest will also increase and there is no further increase in the time period of the loan.
To Conclude, this article tried to put some light on the increasing inflation due to increase in repo rate and the response of banking sector to it. This shows the criticality of the upcoming monetary policy as will it able to solve the biggest problem that the nation facing or create one.