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RBI may hike rates by 25 bps on Friday

By: Latha Venkatesh

CNBC-TV18

Last Updated: September 15, 2011, 18:44 IST

RBI may hike rates by 25 bps on Friday

It is quite possible that home loan EMIs will go up, but in positive side, the FD rates could also go up.

New Delhi: The Reserve Bank of India (RBI) is likely to hike interest rates by 25 bps on Friday as inflation nears double digits. It will be the twelfth hike in 18 months.

While home loan EMIs may go up as a result of the RBI rate hike, the fixed deposit (FD) rates are also expected to go up.

Already interest rates have been hiked for industrial borrowers and now even home loan borrowers, who pay EMIs, would face the rate hike after the RBI move.

Bankers, brokers and fund managers are expecting that RBI will increase the signalling rate by 25 bps.

Currently the signaling rate is 8 per cent and they will raise it to 8 quarter. Basically that is the price at which bank borrows money from RBI. So if the RBI lending to the banks at 8 quarter, not at 8, then bank will obviously have to pass it on because the cost of money goes up.

If the RBI signals rate hike then it is quite possible that home loan EMIs will go up, but in positive side, the FD rates could also go up.
first published:September 15, 2011, 18:44 IST
last updated:September 15, 2011, 18:44 IST