Home Loan EMIs: The new rule of Reserve Bank of India can increase the EMI of loan borrowers. Let us know on whom it will affect.
RBI New Rule: The new rule of the Reserve Bank of India can shock the people taking home loans. Because this rule is giving an option to switch at a fixed rate. In such a situation, amid rising interest rates, banks and finance companies may be forced to increase the interest rate with equal installments. You will be given the option of a fixed interest rate during the loan reset.
Under the new guidelines of RBI, the loan approval letter will have to mention the costs associated with the change in interest rate from floating to fixed in future. Borrowers need to be told that the EMI will cover the monthly interest payment even in the event of a significant increase in rates. This may increase your monthly EMI.
In simple words, if the loan interest increases, then banks and finance companies may be forced to increase the floating rate. When the floating rate increases, the floating based loan fixed interest rate will also increase. This means that there may be an increase in the EMI of the loan even at the fixed rate.
In its circular on personal floating rate reset, RBI said that borrowers should not assess the repayment capacity only on the basis of the current interest rate, but they have to decide that the borrower can meet his payment obligations even if the interest rates rise.
Up to 6% ups and downs have been seen in the single loan circle for some time now. This means that the interest burden has increased rapidly and the tenure of the loan has also increased. In such a situation, to adjust your EMI, you have increased the EMI repayment period or increased the interest rate of the loan.
According to the new rule of RBI, if the repayment is done, then the current interest and maximum interest will have to be calculated. Banks will give the option of repayment only on the basis of existing interest. According to a TOI report, an official said that if forced to, banks will include adequate markup to hedge the risk. In such a situation, taking a loan can also be difficult for some.