{"id":8285,"date":"2022-05-05T20:02:04","date_gmt":"2022-05-05T14:32:04","guid":{"rendered":"https:\/\/www.tickertape.in\/blog\/?p=8285"},"modified":"2022-05-05T20:02:04","modified_gmt":"2022-05-05T14:32:04","slug":"8-areas-affected-by-the-increase-in-repo-rate-for-investors","status":"publish","type":"post","link":"https:\/\/www.tickertape.in\/blog\/8-areas-affected-by-the-increase-in-repo-rate-for-investors\/","title":{"rendered":"8 Areas Affected by the Increase in Repo Rate for Investors!"},"content":{"rendered":"\n<p>In an off-cycle review meeting on 04 May 2022, the Reserve Bank of India (RBI) raised the repo rate by 40 basis points to 4.40%, up from 4% previously, which was last reduced in May 2020. Further, the Cash Reserve Ratio (CRR) has been increased by 50 basis points (<a href=\"https:\/\/www.tickertape.in\/blog\/bps-meaning\/\">bps<\/a>), putting additional upward pressure on interest rates.&nbsp;<\/p>\n\n\n\n<p>The hike will come into effect immediately. But what impact does this have on you as an investor? Let&#8217;s break it down into eight areas:<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_66_1 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tickertape.in\/blog\/8-areas-affected-by-the-increase-in-repo-rate-for-investors\/#1-Impact-on-the-stock-market\" title=\"1. Impact on the stock market\">1. Impact on the stock market<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tickertape.in\/blog\/8-areas-affected-by-the-increase-in-repo-rate-for-investors\/#2-Impact-on-the-stock-prices\" title=\"2. Impact on the stock prices\">2. Impact on the stock prices<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tickertape.in\/blog\/8-areas-affected-by-the-increase-in-repo-rate-for-investors\/#3-Impact-on-the-existing-loan\" title=\"3. Impact on the existing loan\">3. Impact on the existing loan<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tickertape.in\/blog\/8-areas-affected-by-the-increase-in-repo-rate-for-investors\/#4-Impact-on-the-new-loan\" title=\"4. Impact on the new loan\">4. Impact on the new loan<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.tickertape.in\/blog\/8-areas-affected-by-the-increase-in-repo-rate-for-investors\/#5-Impact-on-a-fixed-rate-loan\" title=\"5. Impact on a fixed-rate loan\">5. Impact on a fixed-rate loan<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.tickertape.in\/blog\/8-areas-affected-by-the-increase-in-repo-rate-for-investors\/#6-Impact-on-existing-house-loan\" title=\"6. Impact on existing house loan\">6. Impact on existing house loan<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.tickertape.in\/blog\/8-areas-affected-by-the-increase-in-repo-rate-for-investors\/#7-Impact-on-short-term-FD\" title=\"7. Impact on short-term FD \">7. Impact on short-term FD <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.tickertape.in\/blog\/8-areas-affected-by-the-increase-in-repo-rate-for-investors\/#8-Impact-on-long-term-FD\" title=\"8. Impact on long-term FD\">8. Impact on long-term FD<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"1-Impact-on-the-stock-market\"><\/span>1. <strong>Impact on the stock market<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>The announcement caused <a href=\"https:\/\/www.tickertape.in\/blog\/what-is-equity\/\">equity<\/a> benchmarks to fall sharply, with the BSE <a href=\"https:\/\/www.tickertape.in\/blog\/sensex-companies\/\">Sensex<\/a> falling more than 1,400 points in intraday trade to close at 55,669.03, and the <a href=\"https:\/\/www.tickertape.in\/blog\/national-stock-exchange\/\">NSE<\/a> Nifty settled below 16,700 after a 391-point loss.&nbsp;<\/li><li>This significant shift is caused due to the inverse relationship between interest rates and the <a href=\"https:\/\/www.tickertape.in\/blog\/how-to-invest-in-shares\/\">stock market<\/a>.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"2-Impact-on-the-stock-prices\"><\/span>2. <strong>Impact on the stock prices<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>Companies tend to cut back on growth and expansion plans as banks raise interest rates, resulting in a drop in growth, impacting earnings, and future cash flows, and finally leading to a dip in stock prices.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"3-Impact-on-the-existing-loan\"><\/span>3. <strong>Impact on the existing loan<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>If you&#8217;re an existing borrower, this hike spells bad news; as banks get their funds at a higher interest, they will increase their lending rates, increasing the EMI.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"4-Impact-on-the-new-loan\"><\/span><strong>4. Impact on the new loan<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>Prepare yourself for higher EMIs because an increase in the repo rate will cause banks to raise interest rates on loans, which means that new loan EMIs will become more expensive &#8211; be it a home, a car, or a personal loan.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"5-Impact-on-a-fixed-rate-loan\"><\/span>5. <strong>Impact on a fixed-rate loan<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>In the case of a fixed-rate loan, such as an auto loan or a personal loan, the <a href=\"https:\/\/www.tickertape.in\/blog\/flat-interest-rate-vs-reducing-balance-interest-rate\/\">interest rate<\/a> hike will not affect your loan, and you can keep paying your EMIs.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"6-Impact-on-existing-house-loan\"><\/span>6. <strong>Impact on existing house loan<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>Existing house loan borrowers will be the most negatively affected, as most home loans are on a floating rate basis, meaning that any rate hike is passed on to the borrower.&nbsp;<\/li><li>Since most banks use the repo rate as their external benchmark, increasing the repo rate will increase lending interest rates. According to the RBI&#8217;s rule, all floating rate house loans obtained after 01 October 2019 are tied to an external benchmark.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"7-Impact-on-short-term-FD\"><\/span>7. <strong>Impact on short-term FD <\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>The interest rate on deposits is expected to move upwards. Therefore, you can hope for higher returns on new FDs.\u00a0<\/li><li>If you are opening a new FD or renewing an existing one, choosing a shorter-term FD, such as one year or less, is advisable, so that the deposit is not locked at a lower rate.<\/li><li>Also, short- to medium-term interest rates are usually the first to rise whenever the interest rate cycle reverses from the bottom.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"8-Impact-on-long-term-FD\"><\/span>8. <strong>Impact on long-term FD<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>Long-term interest rates on FD will take a little longer to increase significantly.\u00a0<\/li><\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Keep up to date on how the RBI&#8217;s 40 basis point repo rate hike affects your stock market investments, FD interests, loans, EMIs, and more. <\/p>\n","protected":false},"author":93,"featured_media":8172,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"_lmt_disableupdate":"","_lmt_disable":"","footnotes":""},"categories":[10,1744],"tags":[16,667,51,271],"acf":[],"modified_by":"Neera Bhardwaj","jetpack_featured_media_url":"https:\/\/www.tickertape.in\/blog\/wp-content\/uploads\/2022\/03\/08-4.png?wsr","_links":{"self":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/8285"}],"collection":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/users\/93"}],"replies":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/comments?post=8285"}],"version-history":[{"count":1,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/8285\/revisions"}],"predecessor-version":[{"id":8286,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/8285\/revisions\/8286"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media\/8172"}],"wp:attachment":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media?parent=8285"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/categories?post=8285"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/tags?post=8285"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}