Do you have an EMI? RBI rate hike to make your borrowings more expensive

The RBI raised interest rates to the highest in 2 years to tackle inflationary pressures.

RBI Policy: Planning to take a loan? You should not wait any longer. EMIs (equated monthly installments) on home, personal, auto and other loans are set to get costlier as the Reserve Bank of India (RBI) increased the repo rate by 25 basis points to 6.5 per cent from the previous rate of 6.25 per cent. The RBI has also raised the reverse repo rate by 25 basis points to 6.25 per cent. The decision was taken during the RBI’s Monetary Policy Committee’s (MPC) bi-monthly meeting on Wednesday.

In its last monetary policy meeting on June 6, the RBI had already increased the repo rate by 25 bps (basis points). Headed by governor Urjit Patel, the central bank raised key policy rates to the highest in two years for the second time in a row in last two months to tackle inflationary pressures. Over the last two bi-monthly MPC review meetings; there has been a total of 50 bps increase in the repo rate. The second-consecutive increase in repo rate comes as a shocker for those who are already paying EMIS, taken loans from banks or are planning to borrow in future.  RBI Rate Hike

You should be concerned about repo rate hike because it will directly affect your EMIs as banks will soon increase their lending rates. The repo rate has a direct impact on bank’s cost of borrowing from the central bank, that means the banks will raise their MCLR (Marginal Cost of Funds based Lending Rate) or charge more interest on loans. Hence, it makes costlier for lenders (banks) to borrow money. As the interest rate of loans is linked to the MCLR, repo rate surge causes a hike in interest or lending rates. Home loan borrowers will be affected to a great extent as housing loans are taken for a longer duration. In fact, since the beginning of this year, several banks have been increasing their MCLR rates, said a Livemint report.

New loan borrowers will have to bear the impact of increased interest rates on loans. RBI's second consecutive rate hike since October 2013, is likely to prompt action by banks or react to the policy decision, hence, EMIs will become expensive for potential loan seekers to borrow funds in future. If you cannot afford to pay higher EMIs, then you can prefer to borrow loan under the...continue reading

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News Source: BS

SBI to hide PAN info on tax refund envelopes after activist raises concerns

Activist Batra wrote to Urjit Patel, alleging that SBI was violating its directions on ‘protection of customer’s information’ by sending crucial information.

Income tax News : State Bank of India will “redesign” its envelopes used to dispatch tax refund cheques of customers to cover their PAN and contact numbers, after an activist raised that the crucial personal information was visible to anyone which may result in misuse, the bank said.

The move comes nearly 16 months after activist Commodore (retd) Lokesh Batra raised the issue that the window envelopes used by SBI make it easy for someone to glance through permanent account number (PAN) and contact number of the tax payee and misuse it.

Batra wrote to Reserve Bank of India (RBI) Governor Urjit Patel, alleging that SBI was violating its directions on ‘protection of customer’s information’ by sending crucial information about customers in “unsecured envelopes”.

“…this systemic failures by banks must be breaching the personal information of very large numbers of People. I had reported this matter at the highest level in SBI…, but as of now no one has even blinked…and breaching of people’s personal information is continuing,” he wrote to the RBI Governor on November 28.

He said he had been “pleading” with SBI at the highest level for the past 16 months to ensure compliance with RBI directions, but nothing has changed.

Click to Read → Permanent Account Number

What rate cut means for financial markets

The new Monetary Policy Committee (MPC) decided unanimously to implement a rate cut in its first review. That brings the Repurchase (repo) rate down to 6.25 per cent with consequent adjustments of the reverse Repo to 5.75 per cent and the MSF (marginal standing facility) to 6.75 per cent.

The stock market had a favourable response. The consensus was slightly in favour of status quo so, there will be fresh long positions. Obviously, the financial sector will see more of a boost than the broad market. Housing finance and NBFCs will gain some fresh momentum alongside banks.

The Reserve Bank of India (RBI) is confident that it can meet targets of consumer price index (CPI) inflation at five per cent by Jan-Mar 2017 and the medium-term target of four per cent CPI (within a band of +/- 2 per cent). Agricultural performance has been good and food inflation will reduce. Fuel inflation has been low. Core inflation (excluding food, fuel) has been at around five per cent. Household inflationary expectations are up.

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Patel debuts with rate cut

WHY RBI DECIDED TO CUT RATE

• Expects global growth forecast to be lowered
   
• IMF has retained 2017 world growth forecast at 3.4%, compared with 3.6% in Jan
   
• Says sharp downturn in food prices will lead to softer inflation numbers
   
• Food inflation fell to 5.91% in August from 8.35% in July
   
• Cites low fuel inflation
   
• Crude oil prices steady at around $50 a barrel
   
• Input costs firm up but companies don’t have pricing power
   
• Capacity utilisation of manufacturing firms at 72.9% in Q1 FY17 from 74% in Q4 FY16

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RBI to announce monetary policy review today

The Reserve Bank of India will announce its monetary policy review on Tuesday.

It will be announced in the afternoon at 2:30 pm against the existing practice of 11 am.

This will be Urjit Patel's maiden policy announcement as the RBI Governor.

Unlike his predecessor Raghuram Rajan who had the final say on interest rate cut decisions, Patel will have to go by the advice of a newly set up six-member monetary policy committee (MPC).

This is for the first time that decision-making on interest rates will shift to the six-member panel which has equal representation from RBI and the government.

Since January 2016, the RBI has cut the repo rate - the rate at which RBI lends to banks - five times. India's retail inflation has touched a five-month low of 5.05 per cent in August, triggering hopes of a rate cut.

The RBI and the government have set a retail inflation target of four per cent for the next five years with an upper tolerance level of six per cent and lower limit of two per cent.

Most analysts expect a status quo on rates. Mounting bad loans will remain another focus area of Patel's debut policy review.

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