On May 3rd, 2011 Reserve Bank of India increased repo rate (rate at which RBI provide short term borrowing to banks) and reverse repo rate (rate at which bank invest fund for short term purpose with RBI) by 50 basis points (1 basis point = 0.01%). And also increase saving bank interest rate from 3.5% to 4% p.a.
Hikes in the rates will affect cost of borrowing of home loan and auto loan.
Generally, auto loans are having fixed interest rate hence it will not affect to existing customer but for fresh customer, auto loan will be costlier.
In case of home loan, floating rate will change due change in rate by RBI.
Home loan will be costlier by 0.50%.
RBI has taken this step to control inflation.
Good news is that RBI hiked the saving interest rate from 3.5 % to 4% which will increase interest revenue who are parking more fund in saving accounts.
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