As HDFC, ICICI respond to RBI’s rate hike, a look at the impact on consumers and investors

While HDFC has increased the interest it will charge on home loans, ICICI has responded to the rate hike by increasing interest to be paid on fixed deposits.

FPJ Web DeskUpdated: Friday, September 30, 2022, 07:10 PM IST
article-image
The interest rates will make home loans more expensive, while households with investment in FDs will get better payouts. |

Personal retail loans in India went up by 42 per cent between March 2021 and 2022, while the home loan market already worth Rs 24 lakh is expected to clock 100 per cent growth in five years. Among investments dependent on interest rates, fixed deposits (FDs) make up the biggest chunk of India’s wealth with 18 per cent and are set to become more attractive. As HDFCs home loans are set to cost more since it has hiked interest on prime lending by 50 basis points, ICICI is offering better returns on FDs, by increasing interest rates on them by 20 basis points.

The trickle-down effect of RBI’s policies

These changes in interest rates with varying effects for borrowers and investors, come as a response to RBI’s interest rate hike earlier today. The banking regulator’s move is primarily aimed at controlling inflation, by restricting the availability of cash for consumers, which will bring down demand. But this policy of aggressive interest rate hikes can also have more implications for stock markets, businesses and consumers.

First of all business expansion of firms will slow down as financing from banks will become costlier, collectively hitting overall economic growth. If a repo rate hike doesn’t bring down inflation significantly, then it will lead to stagflation, where price rise remains persistent and also leads to unemployment on top of it. This is why the rate hikes globally, which are the only choice for buckling inflation, are bound to open doors for a long recession.

Lenders have started responding

Loans for homes or vehicles and even smartphones will become more expensive, and EMIs will jack up monthly bills, and increase household debt which can hit daily purchases too. This is reflected in HDFCs announcement to scale up interest to 17.45 per cent for its adjustable or floating rate home loans.

On the contrary, ICICI Bank’s decision to increase interest on FDs to 5.70 per cent and 5.80 per cent on FDs maturing in two years and three years respectively, shows benefits for investors. With such changes, people who have parked funds in FDs stand to receive higher payouts through interest.

(To receive our E-paper on whatsapp daily, please click here. To receive it on Telegram, please click here. We permit sharing of the paper's PDF on WhatsApp and other social media platforms.)

RECENT STORIES

Who are Sudipta Bhattacharya, Sanjay Pugalia and Senthil Chengalvarayan? Know all about the trio...

Who are Sudipta Bhattacharya, Sanjay Pugalia and Senthil Chengalvarayan? Know all about the trio...

Adani's takeover of NDTV nears completion after promoters transfer their stake

Adani's takeover of NDTV nears completion after promoters transfer their stake

Are we going to see 1000 word tweets? It's on Elon Musk's to do list

Are we going to see 1000 word tweets? It's on Elon Musk's to do list

Rupee rate falling won't affect most rated Indian firms: Moody's

Rupee rate falling won't affect most rated Indian firms: Moody's

Purchase from ministries pushes procurement from govt portal GeM past Rs 1 lakh cr for FY23

Purchase from ministries pushes procurement from govt portal GeM past Rs 1 lakh cr for FY23