Retail customers in the last few months have seen their equated monthly installments go up significantly, which were in line with the Reserve Bank of India’s (RBI) repo rate hike. Most EMIs on auto loans, home loans, and personal loans are tweaked whenever the RBI revises its repo rate.
Talking about revision in EMIs rates during the BT Banking & Economy Summit, Saugata Bhattacharya, Executive VP & Chief Economist, Axis Bank said that of late, the rate revision cycle has been very sharp since the pandemic, which has stressed the system further. “Liquidity surplus in the market used to be Rs 6-7 lakh crore till last year, this has now shrunk to zero. Hence, the EMIs are going up. But fortunately, we are more or less done with the rate tightening cycle, says Bhattacharya. Hopefully, we will be starting to see an easing.”
During a rising interest rate scenario, the banking sector passes on rate hikes through the floating rate loans while delaying the rate hikes for deposits, benefitting from spreads, and expanding margins.
In 2022, the RBI revised its repo rate four times to control rising inflation. After 50 basis points hike three times in a row, RBI softened in December policy and increased the repo rate by 35 basis points to 6.25 per cent. Hence, so far in FY23, the repo rate has been increased by 225 basis points.
|Date of update||Repo Rate|
|December 7, 2022||6.25%|
|September 30, 2022||5.90%|
|August 05, 2022||5.40%|
|June 08, 2022||4.90%|
Bhattacharya, while speaking to Siddharth Zarabi, BT TV Managing Editor, said the earnings growth of the banks is expected to be on the positive side as the non-performing assets side is being aggressively cleared. He said that this would further ease the EMI burden on retail customers.
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