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RBI Increases Repo Rate by 50 Basis Points to 5.90%

RBI Increases Repo Rate by 50 Basis Points to 5.90%

RBI Increases Repo Rate by 50 Basis Points to 5.90%
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The Reserve Bank of India on September 30, 2022, hiked the repo rate by 50 basis points. The increase the six-member RBI monetary policy committee has brought the repo rate, at which the central bank lends money to banks in India, at 5.90%. This is the fourth time the RBI has increased the repo rate to fight an intensifying battle against a depreciating rupee and a stubbornly high inflation.

The move is likely to result in banks increasing home loan interest rates in the ongoing festive season, impacting buyer sentiment.    

 

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RBI Increases Repo Rate by 50 Basis Points to 5.40%

A stubbornly high inflation  level and a consistently weakening rupee has forced the Reserve bank of India (RBI) to hike the repo rate by another 50 basis points on August 5, 2022. The hike in the policy rate, announced after a three-day meet of the RBI's Monetary Policy Committee,  has brought the repo rate to 5.40%.

This is the third consecutive hike in RBI's benchmark lending rate after a 40 basis point hike in May and a 50 basis point boost in June this year. 

 

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RBI Increases Repo Rate by 50 Basis Points

The RBI, on June 8, 2022, increased the repo rate, at which it lends funds to scheduled banks in India by 50 basis points. The RBI move, which is on a widely expected lines, has brought the repo rate to 4.90% now.

In a media interview in May 2022, RBI governor Shaktikant Das had stated that further increase in repo rate was a 'no-brainer' as the banking regulator fights stubbornly high levels of  inflation. 

Wednesday's announcement will prompt the banking industry to announce interest rate hikes of its own, ultimately bringing up the cost of property purchases.

 

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RBI Increases Repo Rate by 40 Basis Points, CRR By 50 Basis Points

May 4, 2022: The RBI on May 4, 2022, announced an increase in the repo rate by 40 basis points. With this, the repo rate, at which the central banks lends funds to banks in India, stands at 4.40%. In a surprise virtual briefing, RBI governor Shaktikanta Das announced a hike of 50 basis points in cash reserve ratio, bringing it to 4.50%.  

Real estate experts are of the opinion the move will start the end of the record low interest rate regime, increasing the cost of borrowing home loans. 

"An increase in repo rate has been expected on the back of very high inflation. Rising interest rates along with rising prices of homes on account of high inflation will have a significant negative impact on the real estate sector as both impact affordability significantly," said Rohit Gera, managing director, Gera Developments.

 

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RBI Leaves Repo Rate Unchanged At 4% For 11th Straight Time

April 8, 2022: The Reserve Bank of India, on April 8, 2022, decided to leave the repo rate unchanged in its bi-monthly policy review. This was the 11th time in a row that the RBI's six-member MPC has decided to leave the repo rate unchanged at 4%. Consequently, the reverse repo rate remains unchanged at 3.35%. RBI Governor Shaktikanta Das also announced that the central bank would continue with its accommodative stance. 

 

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RBI leaves rates unchanged

February 10, 2022: The Reserve Bank of India's six-member monetary policy panel decided to leave the repo rate unchanged in its bi-monthly policy review on February 10, 2022. This was the 10th time in a row that the RBI Governor Shaktikanta Das-led MPC has decided to leave the repo rate unchanged.

While the central bank's decision to hold the repo rate, at which it lends money to banks in India, was on the expected lines, the RBI surprised markets by also maintaining a status quo on the reverse repo rate, the rate at which it borrows money from banks. 

Consequently, the repo rate and reverse repo rate remain unchanged at 4% and 3.35%, respectively.  RBI's six-member Monetary Policy Committee (MPC), headed by Governor Shaktikanta Das, started deliberations on the bi-monthly policy review on February 8, 2022.

The banking regulator has also decided to continue with its accommodative policy stance, as it attempts to help recovery amid the economic disruption caused by the various waves of the Coronavirus pandemic.

‚ÄúOverall, taking into consideration the outlook for inflation and growth, in particular the comfort provided by improving inflation outlook, the uncertainties related to Omicron and global spillovers, the MPC was of the view that continued policy support is warranted for a durable and broad-based recovery,‚ÄĚ RBI governor Shaktikanta Das said, in his address.

The move by the central bank comes as a pleasant news for those planning to invest in property since banks will continue to keep home loan interest rates at record low.  Currently, one can get home loans at an annual interest rate as low as 6.40%. Recall here that during the housing boom that lasted between 2008 and 2013, banks charged nearly 10% interest on home loans.

"The low-interest rates have been a crucial factor in the revival of the demand in the real estate sector. In the past few months, the buyers have made the most of the rock-bottom interest rates on home loans along with offers from good developers. This might also be the last opportunity for the homebuyers to purchase property with low-interest rates before RBI decides to hike it in any of their future bi-monthly policies," said Pritam Chivukula, co-founder & director, Tridhaatu Realty, and treasurer-CREDAI MCHI. 

"Also, to keep the prices down on the account of rise in raw materials prices will be a huge challenge in front of the developers," he added.

Shraddha Kedia-Agarwal, director at Transcon Developers shared similar views. 
 

"The RBI maintaining status quo on key policy rates was expected, given the inflationary concerns in recent months. The decision will help to sustain liquidity for some more time which will augur well for the real estate sector and the overall economy. The low-interest rates for the last few months have already given a boost to the real estate sector upticking the demand in the last few quarters and enhancing the confidence of the homebuyers. The decision will therefore help to keep up the momentum going forward as well," she said.

 

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RBI Leaves Repo Rate Unchanged At 4%

December 8, 2021: The six-member RBI monetary policy committee (MPC), on December 8, 2021, decided to leave the repo rate unchanged at 4 per cent. The move by the apex bank is  on the expected lines, amid rising fears of the spread of the Omicron variant of the Coronavirus.

‚ÄúWe hold strong buffer to manage global spillovers and inflation is broadly aligned with target. We are better prepared to deal with the invisible enemy - COIVD-19. The domestic economic outlook is somewhat clouded by the Omicron variant,‚ÄĚ said RBI Governor Shaktikanta Das, while announcing the decision of the MPC.

"The decision of the RBI MPC, to keep key policy rates unchanged, is along expected lines. The ongoing growth-inflation trade-off also requires the banking regulator to tread a careful path. Even though economic indicators are reflecting a positive trend, interest rates needed to be kept at the current level, in order to continue to drive growth and boost demand in the real estate sector, which is a key contributor to economic growth in India. If home sales have shown consistent improvement over the past couple of quarters, much of this can be attributed to the record low interest rate regime. Upsetting the current momentum would have been highly detrimental to overall economic recovery," said Dhruv Agarwala, group CEO, Housing.com, Makaan.com and Proptiger.com.

‚ÄúGiven the current eminent Omicron threat, a status quo on repo rates comes as no surprise. These low rates will help maintain the pace of the economic revival. This is also good news for the real estate sector, as low home loan rates, coupled with attractive offers from builders, will keep home buying bullish. Going forward, the focus will be on how long these rates can be sustained and keeping inflation in check,‚ÄĚ added Atul Monga, CEO and co-founder, BASIC Home Loan.

 

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RBI Leaves Repo Rate Unchanged At 4%; Move To Boost Festive Spirit

October 8, 2021: On widely expected lines, the six-member rate setting panel of India’s Reserve Bank on October 8, 2021, decided to leave the repo rate unchanged at four per cent. Even though some economists had indicated that the central bank might go for a token hike in the reverse repo rate ahead of the three-day meeting of RBI’s Monetary Policy Committee (MPC), it also decided to maintain a status quo on this lending benchmark as well, by holding it at 3.35 per cent.

The Governor Shaktikant Das-headed RBI has also decided to maintain its ‚Äėaccommodative‚Äô stance as it keenly watches developments from across the world at a time when economic growth in Asia‚Äôs third-largest economy is in early stages of correction post the coronavirus pandemic mayhem.

While the repo rate is the interest the RBI charges from banks to lend funds, the reverse repo rate is the interest the central bank gives to bank on their deposits with the RBI.

The move by the RBI, which is a signal for banks and housing finance companies in India to continue with a 10-year low home loan interest rate regime, has been widely welcomed by the real estate industry. For sector stakeholders who are anticipating a course correction in activity due to the ongoing festive season, nothing less was expected from the apex bank even though the RBI has cut the repo rate by a total of 115 basis points since March 2020. The lowering of the repo rate in 2020 was a follow-up of the 135-bps cut since the beginning of 2019.

‚ÄúThe RBI maintaining a status quo on key policy rates was expected. Residential demand is reviving in the pandemic context and this needs to be fostered,‚ÄĚ said Lincoln Bennet Rodrigues, chairman & founder, The Bennet and Bernard Company.

Recall here that all leading banks in India have recently cut home loan interest rates to cash-in on the ongoing festive season, and the developer community is expecting significant gains from this.   

‚ÄúGiven the upcoming festive season, which is considered auspicious by a large number of Indians to make big-ticket purchases, the interest rate cut by many banks will lead to a substantial increase in sales. The low interest rate regime is going to be a game-changer for the whole real estate sector especially at a time when the economy is on a recovery trail,‚Ä̬†Rodrigues adds.

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RBI Maintains Status Quo on Repo Rate, Holds It At 4%

August 6, 2021: As economic recovery in the country gains momentum after the containment of the second wave of the Coronavirus pandemic, the Reserve Bank of India (RBI), on August 6, 2021, left the repo rate unchanged at 4% to support the recovery.

While leaving the repo rate at 4% and the reverse repo rate at 3.35%, the six-member monetary policy committee of the RBI also maintained its accommodative policy stance. The MPC has also retained its GDP growth projection of 9.5% for FY22.

This is the seventh time that the RBI has decided maintain a status quo on key policy rates. This also means that home buyers will continue to reap the benefits of a record-low interest rate regime that has brought the rate of housing finance to as low as 6.65 per cent.

The RBI move has been on the expected lines, since most policy experts predicted that the MPC would continue to maintain rates at the current level as it braces to bear the impact of an impending third wave of the Coronavirus pandemic.

“The low interest rates have been a crucial factor in the revival of demand in the real estate sector. The buyers are already coming back to the market and we feel that the upcoming festive season will be a lot better than the previous years," said Pritam Chivukula, co-founder and director, Tridhaatu Realty.

“The reduction in stamp duty charges in some parts of the country, along with the all-time low housing loan rates, have given the much-required fillip to sales activity in the last few quarters. The expectation amongst stakeholders of the industry, is that banks should now further sweeten the lending rates, at least till such time that the economy gets back to the pre-COVID levels," said Kaushal Agarwal, chairman, The Guardians Real Estate Advisory.

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RBI Keeps Repo Rate Unchanged, Maintains Accommodative Stance

June 4, 2021: Announcing a decision that was widely on the expected lines, the Reserve Bank of India (RBI), on June 4, 2021, left key policy rates unchanged while also maintaining an accommodative stance. All 51 economists in a recent Reuters poll, had voted that the six-member monetary policy committee would maintain a status quo on rates in its June 4 policy meeting statement, while most of the analysts polled by Bloomberg also predicted that the RBI would leave key rates unchanged.

With no change in place, the repo rate, at which the RBI lends money to financial institutions in India, stands at 4 per cent. Similarly, the reverse repo rate, at which the RBI borrows money from banks, stands unchanged at 3.35 per cent.

Recall here that this is the sixth time in a row that the RBI Governor Shaktikanta Das-led MPC has decided to leave the repo rate unchanged. The apex bank had reduced the repo rate by 115 basis points (bps) in 2020 and by 135 bps in 2019 to bring interest rates to record lows.

Quoting Greek philosopher Epictetus, the RBI Governor said the greater the difficulty the more glory in surmounting it, adding that the apex bank would continue to support the economy, which is currently reeling under the impact of the second wave of the Coronavirus pandemic. The Indian economy recorded a negative growth of 7.3% for 2020-21 (FY21), showed data released by the National Statistical Office (NSO) on May 31, 2021.

Based on the adverse impact of the fragmented lockdowns imposed by states to contain the second wave, the RBI has lowered the growth forecast for FY22 to 9.5% from the earlier 10.5%.

 

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RBI Leaves Repo Rate Unchanged At 4%

April 7, 2021: The Reserve Bank of India (RBI) on April 7, 2021, decided to leave the repo rate, at which it lends funds to scheduled banks in India, unchanged at 4%. The unanimous decision of the six-member monetary policy committee, headed by governor Shaktikanta Das, is on widely expected lines as the numbers of coronavirus cases in India see a sharp spike and high inflation levels.

While also keeping the reverse repo rate unchanged at 3.35%, the MPC has also decided to maintain its accommodative monetary stance to help economic recovery.  This is for the fifth straight time the apex bank has decided to maintain a status quo on key policy rates. The last change in rates was made in May 2020.

The policy announcement, the first for the fiscal, will prompt lenders in India to continue offering record low home loan interest even though the country’s largest bank SBI increased its home loan rates by 25 basis points to 6.95%  

However, the builder community feels some reduction in rates would have been a more positive move as for real estate, the second-biggest employment generating sector in India after agriculture.

"Keeping in mind the resurgence of Covid infections across the country, a slight reduction in the key rates would have been widely celebrated. With the temporary reduction in transaction costs being withdrawn, in states like Maharashtra, the expectation amongst stakeholders of the industry is that the banks should now further sweeten the lending rates, at least till such time that the economy gets back to the pre-COVID levels," said Kaushal Agarwal, chairman, The Guardians Real Estate Advisory.

 According to Lincoln Bennet Rodrigues, founder and chairman, Bennet & Bernard Group, residential demand is reviving and this needs to be fostered. 

 "A further cut in the key rates would have given a boost to current demand uptick that we have seen recently... The International Monetary Fund has projected an impressive 12.5% growth rate for India in 2021, stronger than that of China which augurs well for the real estate sector, too. As the economy is gradually opening up and getting back on track to restore the lost momentum, we feel that special attention should be paid to the sector which contributes significantly to the country's economic growth," he says.

 

 

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Home Loan Rates To Remain Low As RBI Maintains Status Quo On Repo Rate

February 5, 2021: The current low home loan interest rate regime in India is set to continue, with the RBI deciding to keep the repo rate, at which it lends funds to scheduled banks in the country, unchanged at four per cent. The move by the central bank comes days after finance minister Nirmala Sitharaman presented the Union Budget for 2021-22, announcing several measures to support growth in Asia’s third-largest economy.

In a virtual address to the media, Reserve Bank of India (RBI) Governor Shaktikanta Das said the six-member monetary policy committee had taken a unanimous decision, to maintain status quo on the key lending rate while also continuing with the banking regulator’s accommodative stance. Das, however, indicated that the RBI might go for further reductions in the future, to support the economy, which is currently reeling under the effects of the Coronavirus pandemic.

After lowering the repo rate by a cumulative 115 basis points since March 2020, to counter the pandemic, India’s apex bank has continued to maintain a status quo on its benchmark lending rate since May 22, 2020 - the last time it lowered the repo rate.

‚ÄúThe RBI decision to keep policy rates unchanged is welcome, and signals the government‚Äôs focus on fuelling consumption. Given that the economy is well on its path to recovery, the entire focus would now be on how the government plans to boost demand and a lot needs to be done for the sector to improve the pace of growth,‚ÄĚ says Surendra Hiranandani, chairman and managing director, House of Hiranandani.¬†

While the RBI's move is on the expected lines, real estate developers, who were largely left disappointed in the Union Budget, said they expected a reduction in rates. ‚ÄúAfter a budget that had limited announcements for real estate, the sector was hoping against hope for a further reduction in the repo rates. A reduction would have helped to spur demand for real estate assets that have been severely hit, as a result of the pandemic and the subsequent lockdowns,‚ÄĚ said Kaushal Agarwal, chairman, The Guardians Real Estate Advisory.

According to a Reuters poll, the RBI may continue to keep rates unchanged till 2023, in order to support the economy.  The next meeting of the MPC is scheduled during April 5 to 7, 2021.

 

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RBI Leaves Repo Rate Unchanged Over Inflation Concerns

December 4, 2020: Banking regulator RBI, on December 4, 2020, left the key policy rates unchanged, while also maintaining an accommodative stance, in the backdrop of a slowing economic contraction and rising inflation.

The decision after a three-day meet by the six-member monetary policy committee (MPC), was on widely anticipated lines amid the consumer price-based inflation rate in India jumping to 7.61 per cent in October, much above the RBI's comfort zone of 4 per cent, while GDP contracted by 7.5 per cent in the July-September quarter, lower than the central bank’s prediction of 8.6 per cent.

With the decision on November 4, the repo rate and the reverse repo rate remain unchanged at 4 per cent and 3.35 per cent, respectively. This is the third time in a row that the central bank has decided to maintain status quo on policy rates. It last changed the policy rate on May 22, 2020.

“The MPC decided to continue with accommodative stance of the monetary policy as long as necessary, at least till the current financial year and into next year, to revive growth on a durable basis and mitigate the impact of COVID-19, while ensuring that inflation remains within target," RBI governor Shaktikanta Das said, at the virtual announcement of the policy move.

‚ÄúThe recovery in rural demand is expected to strengthen further, while urban demand is also gaining momentum as unlocking spurs activity and employment, especially of labour displaced by COVID-19. These positive impulses are, however, clouded by a possible rise in infections in some parts of the country, prompting some local containment measures. At the same time, the recovery rate has crossed 94 per cent and there is considerable optimism on successes in vaccine trials,‚ÄĚ the RBI said in its policy statement.

Even though the RBI may lower the rate only during the April-June quarter now, sector experts are of the opinion that the demand for housing in India will continue to be robust, because of the record low interest rates and various other support measures announced by the banking regulator earlier, to support the country’s second-biggest employment-generating sector.

‚ÄúThe RBI move to maintain status quo on policy rates was expected, in the face of persistently high retail inflation and an already record low repo rate of 4%. Even as signs of recovery appear in Asia‚Äôs third-largest economy, the RBI has said that it would be open to cutting rates, if the economy needs support, which is a very positive signal for the future. The earlier measures announced by the RBI, including the rationalisation of risk-weightage norms for home loans, linking it to LTV and restructuring of loans to developers on a project basis, will continue to help the housing sector,‚ÄĚ said Dhruv Agarwala, Group CEO, Housing.com, Makaan.com and Proptiger.com.

‚ÄúInterest rates on home loans are already at sub-7% level, with banks offering further sweeteners, such as processing fee waivers among many others. We hope banks will continue to lend vigorously to the real estate sector, the second-largest employment generating sector in India,‚ÄĚ he added.

"If the economy recovers, which is likely after the RBI said it would maintain liquidity in the market and the job market remains vibrant, the affordable housing segment buyer will expedite the process of owning a property. We hope that growth projections improve, leading to a demand boost in the real estate sector," said Pradeep Aggarwal, founder & chairman, Signature Global Group, and chairman, ASSOCHAM National Council on Real Estate, Housing and Urban Development.

"While the apex bank has kept the repo rates unchanged this time, the year in general has witnessed significant measures adopted by the RBI such as rationalization of risk-weightage norms, restructuring of loans based on the projects, linking home loans to LTV which have encouraged buyers to fulfill their dream of engaging in a high-end investment like real estate. At the same time, though a lot of retail banks have now also paced up, passing the benefits to the borrowers, we hope the remaining banks are also as swift in passing on the benefits to customers and continue to adopt a quick disbursal process of funds and loans, keeping real estate as a priority in their lending list, says Amit Modi, president-elect, CREDAI Western UP, and director, ABA CORP.

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RBI Maintains Status Quo On Repo Rate

October 9, 2020: The Reserve Bank of India (RBI), on October 9, 2020, decided to leave its key policy rates unchanged as the central bank struggles to create a perfect balance between containing high inflation levels and fuelling economic growth, at a time when it has slipped into its deepest level of recession.

Announcing the decision of the six-member monetary policy committee (MPC), RBI Governor Shaktikanta Das said the repo rate and reverse repo rate remain intact at 4% and 3.35%, respectively. The apex bank has also decided to maintain an accommodative stance.

While the move augurs well for fixed deposit holders, it is an indication that home loan interest rates might not fall any further from this level.

After the RBI, through consecutive cuts, brought the repo rate to its record low level to support growth amid economic uncertainty caused by the Coronavirus spread, almost all leading banks in India have reduced home loan interest rates to sub-7% annual interest. Financial institutions like SBI and ICICI Bank are also offering waivers of processing fee and other associated expenses, to lower the cost of borrowing for homebuyers.

However, these rates are typically for new borrowers. Customers who are already servicing a home loan, are likely to have varying impacts on their EMI payments, depending on the benchmark with which their home loan is linked.

You may like to read: Banks Told To Link Home Loans With External Benchmarks From Oct 1

 

Repo-rate linked home loans

In case of a borrower whose home loan is linked with the repo rate, the same EMI outgo will continue, as the RBI has hit the pause button on the repo rate reduction. However, in case your lender decided to increase the risk premium, depending on your current monetary condition, the EMI might see a slight increase from its existing level.

 

MCLR-rate linked home loans

In the same way, no change is likely in your EMI outgo, in case your loan is linked with the previous MCLR (marginal cost of fund-based lending rate) regime. This is because lenders typically have a one-year reset clause in the loan agreement. Under this arrangement, the EMI of a borrower for the year to come are calculated at set intervals, and changes made in the repo rate by the RBI are reflected in your EMI outgo only after that.

 

Base rate or BPLR-linked home loans

It is highly recommended that those borrowers whose home loans are still linked with the base rate regime or the BPLR regime, should make a switch to the repo rate-linked benchmark. This is because these used to be internal benchmarks, allowing banks greater flexibility to tweak rates as and when it suited them. Under these benchmarks, which were replaced by the MCLR regime in 2016 and then by the repo rate regime in 2019, home loans are still priced at over 10% annual interest.

Also read: Govt Wants To Make Home Loan EMIs Cheaper Than Rent. Should You Buy, Then?

Current Key Rates

DateRepo RateReverse Repo RateCRRSLR
May 20204%4%3%18%
Mar 20204.4%4.4%3%18.25%
Feb 20205.15%4.9%4%18.25%
Oct 20195.15%4.9%4%19.5%
Aug 20195.4%5.15%4%19.5%
June 20195.75%5.5%4%19.5%
Apr 20196%5.75%4%19.5%
Feb 20196.25%6%4%19.5%
Dec 20186.5%6.25%4%19.5%
Oct 20186.5%6.25%4%19.5%
Aug 20186.5%6.25%4%19.5%
Jun 20186.25%6%4%19.5%
Apr 20186%5.75%4%19.5%
Feb 20186%5.75%4%19.5%
Oct 20176%5.75%4%19.5%
Aug 20176%5.75%4%20%
June 20176.25%6%4%20%
Apr 20176.25%6%4%20.5%
Jan 20176.25%5.75%4%20.5%
Oct 20166.25%5.75%4%20.75%
Apr 20166.5%6%4%21.25%
Sep 20156.75%5.75%No ChangeNo Change
Jun 20157.25%6.25%No ChangeNo Change
Mar 20157.5%6.5%4%21.5%
Jan 20157.75%6.75%4%22%

Source: RBI website

Also read: How Much Time Do Banks Take To Sanction Your Home Loan?

Last Updated: Fri Sep 30 2022

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