Increase in EMI: ‘No reason to panic’

To everybody cribbing over the expected increment in the Equated Monthly Installments (EMI) for all categories of loans due to the recent hike in key interest rates,the Chairman and Managing Director of Punjab National Bank,K R Kamath,said “There is no reason to panic”.

“RBI has increased the key interest rates to contain the inflation. It is very important for all of us to understand that interest rates are flexible and subject to quarterly changes. If inflation decreases over the next six months,the interest rates can be brought down in the fourth quarter of the current fiscal year,” Kamath said.

“Suppose a person gets a loan for 20 years,five interest rate cycles will fall within that period. In every cycle the rates are likely to fall down or rise further. But at the end of the period,the gross payable amount will be equated out for the consumer,” Kamath added.

RBI had announced a hike of 25 basic points in key interest rates on Thursday. This 0.25 percent hike will increase the repo rate – the rate at which banks borrow money from RBI – to 7.50 percent and the reverse repo rate – the RBI’s borrowing rate from banks – to 6.50 percent.