Interest Rate Hike to Impact the Middle Class

The Reserve Bank of India’s 25 basis point repo rate hike to 5.50% has prompted several banks to raise their repo linked lending rates, making loans costlier for borrowers. Punjab National Bank, Indian Bank, Bank of Baroda, Bank of India, Indian Overseas Bank and Tamilnad Mercantile Bank have revised their repo linked rates, with the changes taking effect from October 8. PNB’s RLLR has increased from 8.10% to 8.35%, while Indian Bank’s rate has risen from 7.95% to 8.20%. Bank of Baroda has raised its rate from 7.90% to 8.15%, while Bank of India and Indian Overseas Bank have increased theirs to 8.35%. Tamilnad Mercantile Bank has raised its RLLR to 8.50%.

The rate hike is expected to increase borrowing costs for customers with repo linked floating rate loans, including some home loans. The impact could be more noticeable among affordable and mid income homebuyers, with experts saying higher EMIs could lead some buyers to delay purchases or reassess their budgets. For example, a ₹50 lakh home loan over 25 years at 7.50% would have an estimated EMI of ₹36,950; at 7.75%, it would rise to about ₹37,766, an increase of ₹817 per month.