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NriDealExpert | Updated: August 1, 2018 20:00 BST

RBI hikes repo rate: NRI Home loans to get costlier; NRI Fixed Deposits (NRE FD) may see high returns

On August 1, 2018, Reserve Bank of India (RBI), India's central bank has increased the repo rate (the rate at which banks borrow from the RBI) by 0.25 per cent (25 basis points) for the second time consecutively. With this hike, the repo rate stands at 6.50%. Five of six members on the RBI's rate panel voted to increase the repo rate to curb the increasing inflation based on rising crude oil prices, volatility in global financial markets and uncertainty around the Minimum Support Price (MSP) on inflation. The RBI targets the inflation rate at 4 per cent, higher than the annual consumer inflation at 5 per cent in June 2018. If the consumer inflation in India remains higher than this target, then there might be further increases in the repo rate in the future.

In June, when the RBI increased the repo rate to 6.25 per cent, several banks including State Bank of India (SBI) had increased their home loan rates for borrowers including NRIs. This means the latest increase in repo rate may also result in an increase in India Home Loan interest rates for Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs). The NRI home loan interest rates will increase immediately for new borrowers as and when the banks update their Marginal Cost of funds based Lending Rate (MCLRs). But it will come into effect for existing borrowers in the next reset date of their home loan. An increase of 0.25 per cent in an NRI Home loan of Rs. 1 lakh for 20 years will increase the Equated Monthly Installments (EMIs) by Rs. 16 and 0.50 per cent increase will increase the EMI by Rs. 32.

Increase in NRI Home Loan EMI and interest cost with interest rate hike of 0.25% and 0.50% on an 8.60% interest rate loan (Source: NriDealExpert.com):

Home Loan Amount (Rs.) Tenure Interest Rate Hike of Increase in EMI (Rs.) Increase in Interest Cost (Rs.)
25 lakhs 20 years 0.25% 398 95633
50 lakhs 20 years 0.25% 797 1,91,266
75 lakhs 20 years 0.25% 1,195 2,86,899
1 crore 20 years 0.25% 1594 3,82,532
25 lakhs 20 years 0.50% 800 192,027
50 lakhs 20 years 0.50% 1,600 3,84,055
75 lakhs 20 years 0.50% 2,400 5,76,083
1 crore 20 years 0.50% 3,200 7,68,110

Since, this is a second rate hike in the second monthly monetary policy committee, NriDealExpert recommends NRI home loan borrowers to shop around to find cheaper NRI Home Loans once their home loan interest rate is updated and make periodical pre-payments to keep their interest costs low.

Indiabulls NRI Home loan

To find out, how NRI Home Loan interest rates compare across all banks and housing finance companies in India, visit NriDealExpert's NRI Home Loans page.

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