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Prepare To Shell Out More To Live Your Dream

No Comments Sub Category:Community,Realty News Posted On: May 04, 2011

Interest rates on all loans will go up. However, there could be some cheer for  savings bank account holders as the RBI simultaneously increased interest rates on savings deposits


If you were eyeing that swanky house or a cool set of hot wheels, prepare to shell out more to live your dream. Interest rates on all loans will go up with the Reserve Bank of India raising key policy rates as part of its measures to stem inflation that threatens to enter double digits.

The central bank on Tuesday increased its repo rate from 6.75% to 7.25% and reverse repo from 5.75% to 6.25%. While repo is the rate at which RBI lends to banks, reverse repo is the rate at which RBI borrows from banks.

In effect, for a home loan borrower, a 50 bps increase in interest rates would result in the monthly instalment on a 20-year loan going up by Rs 34 for every lakh. Similarly, for a five-year auto loan, the increase would be around Rs 25 per lakh.

For savings bank account holders, however, there could be some cheer as the RBI simultaneously increased interest rates on savings deposits from 3.5% to 4%, the first such move in eight years.

Banks across the board said they would pass on the increase in cost of funds to their customers. The RBI expects banks’ advances to grow by 19% in fiscal 2012, lower than the 21.4% in the previous year, and pegs deposits’ growth at 17%. It has lowered growth forecasts to the 8% range, down from 8.6% estimated for FY11.

The RBI, which is seen to be floundering as far as its efforts to control inflation is concerned, hopes to tame inflation to 6% by March 2012. However, it is expected to remain at the present level for several months.

Times of India

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