Even though the Reserve Bank has not changed the repo rate in about one and a half years, loans are still getting expensive. Interest rates on various types of loans in the country are already high. Now, many banks have increased interest on loans, especially personal loans, one after the other.
These Banks Have Increased Interest
The banks that have made personal loans expensive include the country’s largest bank, HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank, etc. These major private sector banks have made personal loans expensive by 30 to 50 basis points in the recent past. Personal loans from the four largest private banks have become expensive, from 0.30 per cent to 0.50 per cent.
This Is The Initial Interest Rate
The largest bank, HDFC Bank, has increased the interest rates of personal loans by 0.40 per cent since April. This bank’s interest on personal loans starts at 10.75 per cent. Axis Bank has increased the initial interest rate of personal loans from 10.49 per cent to 10.99 per cent. Similarly, ICICI Bank has increased the initial interest rate from 10.50 per cent to 10.80 per cent, and Kotak Mahindra Bank has increased it from 10.50 per cent to 10.99 per cent.
Increase In The Era Of Stable Repo Rate
Now, the question arises: When there have been speculations of continuous reduction in interest rates for the last several months, how are the interest rates increasing, as well as when the Reserve Bank last increased the repo rate about one and a half years ago? The answer to this also lies with the RBI. Due to a regulatory change by the Reserve Bank, various banks are increasing the interest rates of personal loans.
This Is Why Banks Are Increasing Interest
The Reserve Bank has increased the risk weighting in the case of personal loans. Earlier, the risk weighting rate for personal loans was 100 per cent. The Reserve Bank has increased it to 125 per cent from November 2023. On the other hand, instead of bearing the burden of this regulatory change, banks are transferring it to the customers, which is why interest rates are increasing. There is a fear that personal loans may become even more expensive in the coming days, and the list of banks increasing interest rates may also increase.
