Bank of India has raised its Repo-Linked Lending Rate (RBLR). It has increased the RBLR by 25 basis points—or one-quarter of a percentage point—bringing the rate to 8.35%. The new rate came into effect on October 7. This means that loans linked to the RBLR—such as home loans, car loans, and other credit facilities—will become more expensive.
**Bank raises interest rates on the same day RBI hikes repo rate**
Bank of India announced a hike in loan rates on the very day the RBI raised the repo rate. In its monetary policy review on October 7, the central bank increased the repo rate by 25 basis points, raising it from 5.25% to 5.50%. This marks the first time the RBI has raised the repo rate since 2023.
**Other banks may soon announce interest rate hikes**
Following the RBI's repo rate hike, it was anticipated that public sector and private banks would raise interest rates on their loans. Bank of India was the first to announce an increase in its repo-linked lending rate, effective October 7. Consequently, all repo-linked loans from Bank of India will now become costlier. Banks are required to link their loan interest rates to an external benchmark, and currently, most banks have linked their loans to the repo rate.
**Home loans, car loans, and other loans to become costlier**
Bank of India is a public sector bank. It is expected that other banks may soon follow suit by raising interest rates on their loans. This will make home loans, car loans, and other credit products more expensive. This move is being viewed as a significant setback ahead of the festive season. The interest rate hike will impact both existing and new borrowers; those who have already taken out home loans will see their EMIs rise, while customers seeking new loans will face higher interest rates.
RBI Raises Repo Rate to Curb Inflation
On October 7, the RBI decided to raise the repo rate to bring inflation under control. All six members of the RBI's Monetary Policy Committee supported the proposal to hike the rate. Retail inflation had reached 4.82 percent in August.
Surge in Crude Oil Prices Drives Global Inflation
Inflation has been steadily rising for several months, driven by high crude oil prices. Inflation is increasing across the globe, including in the United States. In September, the US central bank, the Federal Reserve, raised interest rates by 25 basis points to curb inflation.
PC Social Media
