Stories
RBI Repo Rate Hike: SBI MD Explains When and How Much Your Home Loan EMI Will Increase
- •SBI Managing Director Ashwani Kumar Tiwari stated that interest rates linked directly to the repo rate will see an immediate hike.
- •For an outstanding home loan of Rs 20 lakh, an interest rate hike from 8.50 percent to 8.75 percent will increase the EMI by about Rs 318 per month.
- •Banks may choose to extend the loan repayment tenure instead of immediately increasing the monthly EMI amount when rates rise.
- •Loans linked to MCLR and fixed-rate loans are impacted based on their specific benchmarks and scheduled reset mechanisms rather than an immediate jump.
Key Questions Answered
Loans linked directly to the repo rate will see an immediate change in their interest rates based on associated rules. However, this does not mean that every customer's installments will increase on the exact same day, as the exact timing depends on the bank's effective date and the loan's reset mechanism.
For an outstanding loan amount of Rs 20 lakh with 20 years remaining, the monthly EMI increases by about Rs 318. For Rs 30 lakh, the installment rises by roughly Rs 477, and for Rs 50 lakh, the increase is approximately Rs 794.
When interest rates rise, banks may choose to extend the loan repayment tenure rather than immediately increasing the monthly EMI amount. While this prevents an immediate rise in the monthly financial burden, it may result in the borrower paying interest for a longer period of time.
