Home, car loan rates to rise sharply as RBI tightens policy yet again

Banks are set to increase lending rates by another half apercentage point, leaving a hole in the pocket of borrowers, after the ReserveBank sharply raised key policy rates.

EMI (Equated Monthly Installment) for home loan of a 20-year tenure would go upto Rs 1,066 from Rs 1,032 per lakh at present as banks are set to revise theirlending rates.

For a three-year auto loan, the EMI would increase from Rs 3,289 to Rs 3,311per lakh, according to estimates by experts.

Country's largest lender State Bank of India's Chairman Pratip Chaudhurisaid, "(Rising) input cost would be passed on to the customer."

On the deposit rates, Chaudhuri said they may not go up sharply in the longend. But short-term rates would see an increase as banks are competing withmutual fund schemes which give 8.5-8.75 percent returns.

"I see increase in short-term rates a distinct possibility. There is an interestin the short-term because government is borrowing more at the short-term,"he said.

Country's biggest private sector lender ICICI Bank's CEO and Managing DirectorChanda Kochhar said, "Going forward, banks would review the movement infunding costs and effect further increases in lending rates."

Private sector Yes Bank has already announced upward revision in the lendingrates by 50 basis points.

"The hike is more than expected and it will push interest rates (lendingand deposits) up by upto 50 basis points," Oriental Bank of CommerceExecutive Director S C Sinha said.

Reacting to key rates hike, private sector lender HDFC Bank said that interest rates will go up soon.

Earlier in the day, the RBI raised the short-term lending (repo) rate by 50 basis points to 8 per cent and the short-term borrowing (reverse repo) rate will move up by a similar margin to 7 per cent.

Subsequently, the interest rate under the Marginal Standing Facility, an additional borrowing window, has gone up to 9 per cent from the earlier level of 8.5 per cent.

This is the 11th time since March, 2010, that the RBI has raised the interest rate to check inflation, which is currently ruling at over 9 per cent.