Even though the Reserve Bank hasn’t changed the repo rate for about eighteen months, loans continue to become more expensive.
Interest rates on different types of loans across the country are already high. Recently, several banks have raised interest rates, particularly on personal loans.
These banks have increased interest
Several major banks like HDFC Bank, ICICI Bank, Axis Bank, and Kotak Mahindra Bank have increased the interest rates on personal loans.
These major private banks have recently increased interest rates on personal loans by 30 to 50 basis points.
In other words, personal loans from the top four private banks are now 0.30% to 0.50% more expensive.
The starting interest rate is so much
HDFC Bank has raised personal loan interest rates by 0.40%, starting from April. Now, the interest rate for personal loans at HDFC Bank begins at 10.75%.
Axis Bank has increased its starting interest rate for personal loans from 10.49% to 10.99%.
Similarly, ICICI Bank has raised its starting interest rate from 10.50% to 10.80%, and Kotak Mahindra Bank has increased its rate from 10.50% to 10.99%.
Increase in the era of stable repo rate
The question arises: despite speculation about interest rate reductions over the past several months, why are interest rates increasing, especially since the Reserve Bank last raised the repo rate about eighteen months ago? The reason for this also lies with the RBI.
Following a regulatory change by the Reserve Bank, several banks are raising the interest rates on personal loans.
Because of this, banks are increasing interest
In fact, the Reserve Bank has raised the risk weighting for personal loans. Previously, the risk weighting rate was 100 percent, but the Reserve Bank increased it to 125 percent starting from November 2023.
Instead of absorbing this regulatory change themselves, banks are passing it on to customers, leading to higher interest rates.
There is concern that personal loans could become more expensive in the future, with more banks potentially increasing their interest rates.
