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RBI keeps repo rate unchanged, home loan rates may remain steady

Rishabh Chamoli | 2023-07-27

The Reserve Bank of India (RBI) has maintained status quo for the second consecutive time by keeping the repo rate at 6.50 percent in the latest Monetary Policy Committee (MPC) meeting that concluded on June 8, 2023. The last hike in repo rate happened on February 8, 2023, by 25 basis points (bps).

The Reserve Bank of India (RBI) has kept the repo rate unchanged at 6.50 percent in the latest Monetary Policy Committee (MPC) meeting concluded on June 8, 2023. The cumulative repo rate increment during FY 2022 to 23 stands at 250 basis points (bps) after six upward revisions since May 2022.

The RBI has announced no further hikes in the repo rate the rate at which the apex bank lends money to banks and financial institutions across the country. The current repo rate stands at 6.50 percent. After maintaining an accommodative stance on the repo rate at four percent during the pandemic, the first repo rate revision was announced in May 2022 with a hike of 40 bps. Since then, the RBI has announced six more repo rate hikes. Of this, 50 bps hike was introduced three times, followed by a 35 bps hike in December 2022. The last one was implemented in February 2023, which was a 25 bps rise.

The revisions in repo rate came into effect after MPC meetings scheduled in 2022 on May 4, June 8, August 5, September 30, and December 7. The final increase in the lending rates for the fiscal year ending on March 31, 2023, led to similar hikes in the home loan interest rates charged by banks, thus, impacting the home purchasing power of the masses. However, after the current announcement, the home loan rates are expected to remain stable until the next hike.

What is Repo Linked Lending Rate (RLLR)
Repo Linked Lending Rate (RLLR) is the lending rate which is based on the repo rate set by the RBI. The revision in repo rate has a direct impact on the RLLR. In case of a loan based on RLLR, the floating interest rate will fluctuate up and down as per the revisions in repo rate.

Although the RBI announces repo rate revisions every few months, wherein the rate generally goes up, the current decision hints towards some economic stability. To ensure that any further revisions do not dampen the growth trajectory of the real estate sector, it is hoped that some favourable home loan policies are announced so homebuyers can continue investing, keeping the realty landscape unaffected.