Personal loans have become expensive...?

Even though the Reserve bank hasn't changed the repo rate in around 1.5 years, loans are nevertheless getting more expensive. The nation already has high interest rates on a variety of loan products. These days, a number of institutions have gradually raised the interest rates on loans, particularly personal loans.

These financial institutions have raised the interest

The biggest bank in the nation, hdfc bank, along with ICICI bank, Axis bank, mahindra BANK' target='_blank' title='kotak mahindra bank-Latest Updates, Photos, Videos are a click away, CLICK NOW'>kotak mahindra bank, and others, have increased the cost of personal loans. These big private sector banks have recently increased the cost of personal loans by 30 to 50 basis points. In other words, the four biggest private banks' personal loans have now increased in cost by 0.30 to 0.50 percent.

This is the starting interest rate.

The biggest bank Beginning in April, hdfc bank raised the interest rates on personal loans by 0.40 percent. As of right now, this bank's personal loan interest rate starts at 10.75 percent. The initial interest rate on personal loans from Axis bank has been raised from 10.49 percent to 10.99 percent. Similar increases have been made by mahindra BANK' target='_blank' title='kotak mahindra bank-Latest Updates, Photos, Videos are a click away, CLICK NOW'>kotak mahindra bank from 10.50 percent to 10.99 percent and icici bank from 10.50 percent to 10.80 percent.

Growth during the period of steady repo rates

The question now is, how are interest rates rising, especially considering that the Reserve bank last raised the repo rate around a year and a half ago, given that there have been rumors of continual rate reductions over the past few months? RBI has the solution to this as well. A number of banks are raising the interest rates on personal loans as a result of a Reserve bank regulation change.

Banks are raising interest rates because of this

In reality, when it comes to personal loans, the Reserve bank has raised the risk weighting. Prior to this, personal loans had a 100% risk weighting rate. As of november 2023, the Reserve bank raised it to 125 percent. However, banks are shifting the cost of this regulatory change to their consumers rather than taking it on themselves, which is why interest rates are rising. There is concern that in the days ahead, personal loans could cost considerably more, and the number of banks raising interest rates could rise as well.