RBI Monetary Policy Review

As expected the Repo rate was raised by another 0.25% in the Mid-Quarter Monetary Policy Review by RBI today. This was expected by the market. However a firmer than expected statement on continuing the policy of increasing rates in a calibrated manner means that we could see more such increases in the next policy review.

There may not be any immediate impact of these increases on lending rates as the demand for loans has already been impacted by the current high interest rates. Banks are likely to wait and see how the demand for loan shapes up in the festival season which is just around the corner before they increase rates. But clearly the belt tightening times are likely to continue for loan consumers.

In fact given the continued uncertainty surrounding interest rates there may be some demand for the Dual Rate Home Loans that have been recently announced by HDFC,ICICI and LIC Housing Finance.

However , at Apnapaisa, we feel clearly that interest rate peak cannot be far away and hence locking into such high interest rates for a duration of 24-60 months just does not make sense. If at all you seek safety ICICI’s 12 month Dual rate loan (which charges no premium over its current floating rate) may still make some sense.

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