What’s The Impact of RBI’s Monetary Policy on Home Loan Owners?

The Reserve Bank of India (RBI) is India’s central bank responsible for regulating the country’s monetary policy. Over the years, RBI has taken various measures to ensure the stability and growth of the Indian economy. One of the most important measures taken by RBI is its monetary policy, which has a direct impact on the home loan market in India. This article will discuss how RBI’s monetary policy affects home loan holders and how they can use this information to manage their debts more effectively.

RBI Monetary Policy

RBI’s monetary policy aims to control the money supply in the economy. It does this by changing the interest rate it charges on loans and deposits, as well as influencing the exchange rate of the Indian rupee. The RBI has the power to increase or decrease the cash reserve ratio (CRR) and the repo rate. The CRR is the percentage of deposits that banks must maintain with the central bank, while the repo rate is the rate at which the RBI lends money to commercial banks.

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Effects on mortgage loan owners

Changes in RBI’s monetary policy have a direct impact on home loan holders. A decrease in the CRR or repo rate will lead to a reduction in interest rates on home loans as banks will have access to cheaper funds. This means that home loan owners will be able to pay a lower interest rate on their loans. On the other hand, an increase in the CRR or repo rate will lead to an increase in mortgage loan interest rates, making it more expensive for borrowers to service their debts.

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Impact on loan repayments

Changes in RBI’s monetary policy will also have an effect on the amount that home loan owners have to pay each month. For example, if the RBI reduces the repo rate, banks can reduce the EMI (Equated Monthly Payment) payable by borrowers. This means that home loan owners will have to pay a lower amount each month, making it easier for them to manage their debts. On the other hand, if the RBI increases the repo rate, banks may increase the EMI payable by borrowers, making it difficult for them to service their loans.

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It is clear that RBI’s monetary policy has a direct impact on mortgage loan holders. Changes in the repo rate and CRR can lead to changes in the interest rate and EMI payable by borrowers, which can make it easier or harder for them to manage their debts. Home loan owners should keep an eye on RBI’s monetary policy to ensure that they can manage their debts effectively.


If you are planning to take a home loan, you prefer a newly built house over an old property.

First published: December 7, 2022, 8:44 am IST


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