RBI Repo Rate Hike: Your loan EMI could rise; economists say the RBI will now hike interest rates..

RBI Repo Rate Hike: Discussions regarding an interest rate hike have intensified over the past few weeks. The primary reasons for this are rising crude oil prices and ongoing global geopolitical uncertainty. Brent crude has crossed the $100 per barrel mark, raising concerns about inflation.

This could also impact the common man's finances. If the RBI raises interest rates, EMIs—particularly for floating-rate home loans and other loans—could increase. In other words, borrowing could become costlier in the near future, and the EMIs on existing loans could also be affected.

When might the RBI raise interest rates?

Moneycontrol conducted a poll among nine economists and treasury heads. Most experts predict an interest rate hike by December. Some believe the RBI could implement an initial 25-basis-point hike as early as the October policy review, followed by another 25-basis-point hike in February 2027. If this happens, the repo rate would rise to 5.75 percent.

Aditi Nayar, Chief Economist at ICRA, stated, "If crude oil prices remain high leading up to the next MPC meeting and there are indications of a hike in retail petrol and diesel prices, it could impact inflation. In such a scenario, the decision to raise interest rates might be taken in October rather than December."

Your loan could become costlier.

If the RBI raises the repo rate, it could impact bank interest rates. This means that EMIs for loans like floating-rate home loans could rise, or the loan tenure could be extended.

Interest rates on new home loans and other floating-rate loans could also be higher. Therefore, if you are planning to buy a home or take out a large loan in the coming months, it is important to keep an eye on interest rates. However, the extent of the change in EMI will depend on the bank's interest rate, your outstanding loan amount, and the remaining tenure.

Inflation raises concerns

Inflation is also becoming a cause for concern for the RBI. The CPI inflation rate stood at 4.82 percent in August, up from 4.45 percent in July. This rise was primarily driven by the increased cost of food items and fuel.

Currently, inflation remains within the RBI's target range of 2 to 6 percent. However, there is concern that if crude oil prices remain high, it could impact petrol and diesel prices, potentially affecting the prices of other commodities as well.

SBI economists estimate that CPI inflation could breach the 6.5 percent mark; however, it is expected to fall below 6 percent by early 2027. They believe that crude oil prices could remain above $100 per barrel in the near future.

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