Loan interest rates, EMIs to rise? Two back-to-back 25 bps repo rate hike from RBI soon? — SkimNews
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- SBI Research advocated a 25-bps RBI repo rate hike in the October policy followed by another in December in quick succession, in its Ecowrap report published Friday.
- The RBI kept the repo rate unchanged at 5.25% in August for the fourth consecutive review, with the next Monetary Policy Committee meeting scheduled for October 5-7.
- SBI Research said the expected hikes are driven by domestic economic risks rather than any potential US Federal Reserve action, citing the RBI's 2022 approach as precedent.
- Crude oil has crossed $100/barrel amid geopolitical uncertainty, with SBI's quantile regression estimating $123/barrel at the 60th percentile over the next 15 days (worst-case scenario) versus an alternative model's $105/barrel average.
- Inflation is broadening: the number of commodities accounting for 90% of CPI's weighted contribution rose from 22 in January to 53 in July, with sectors including crude petroleum, beverages, pharmaceuticals, and electronics seeing input costs outpace output prices.
- A full 50-bps pass-through to lending rates would push a ₹50-lakh, 20-year home loan from 8.25% to 8.75%, raising the monthly EMI from ₹42,603 to approximately ₹44,186.
Why it matters: Floating-rate loan borrowers face higher EMIs — on a ₹50-lakh, 20-year home loan, a full 50-bps pass-through adds roughly ₹1,583 to the monthly payment — while FD investors stand to lock in better returns as banks reset deposit rates upward. SBI explicitly frames the call as a domestic inflation-defense play independent of US Fed action, so the trigger is Indian crude and CPI breadth, not global synchronized tightening.
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