RBI hikes Interest rates on your Personal Finances

RBI Interest Rate Increase – The Impact on the Economy & Personal Finance

One of RBI’s key functions is to control the money supply in the economy as well as ‘credit costs’. That is, how much money is available for the industry or economy and what price it should have the paying economy to borrow the money. ‘Availability of money’ is nothing but liquidity and ‘borrowing costs’ is the interest rate.

Both of these (offering money and credit costs) are closely monitored and controlled by the RBI. Inflation and economic growth are strongly influenced by these two factors.

To control inflation and growth, the RBI uses certain tools, such as

  • CASH RAINABLES RATIO
  • LIQUIDITY RELATION UP TO, REPO LEVEL, AVERAGE LEVEL, etc.

A rate of RBI Increase – Impact on the Economy

RBI Hike interest rate

 

The major national and international economic factors that could lead to the possibility of an increase in bank interest rates are:

  • Crude Oil Prices
  • Inflation Rate: In addition to higher oil prices, the Govt Push device for minimum cost price, revisions to the governing body, a good Monson, etc.,

Repo rate inflation

  • Current Account Deficit
  • Value of Rupee: Because of the above factors, the value of the Rupee against international currencies such as the US Dollar has weakened.

weakening rupee value 2018

So, to withstand the inflation rate, the RBI may raise interest rates. But, this could lead to lower economic growth.

RBI raises interest rates – Impact on Personal Finance

When we need money, we take a loan from the bank, the bank imposes a certain interest rate on this loan. The rate at which banks borrow money from RBI by selling their government securities surplus to the central bank (RBI) is known as the “Repo Rate.” Repo rate is a short form of Buyback Rate.

rbi hikes rates impact on home loan

If you plan to buy the property through a short-term loan, you can decide on a “fixed rate loan”. E homeowners could make a partial advance payment of the loan (if you have a separate fund) to reduce the EMI exposure after the interest rate is set.

Certicom - A Group of Chartered Accountants - Articles

 

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Certicom Consulting [ Kedia Arpana & Co ] is a group of Chartered Accountants in the business of Small Business Setup & Statutory Compliance including for Professionals for the past 15 years. We have been an established and popular company with an excellent track record for the best customer satisfaction.

Certicom Consulting

Certicom Consulting [ Kedia Arpana & Co ] is a group of Chartered Accountants in the business of Small Business Setup & Statutory Compliance including for Professionals for the past 15 years. We have been an established and popular company with an excellent track record for the best customer satisfaction.