Loans have become costlier as some banks have hiked their benchmark lending rates soon after the Reserve Bank of India (RBI) announced a 35 basis points increase in repo rate on Wednesday.

The equated monthly instalments (EMIs) of home and other loans are set to rise. Lenders like HDFC Bank and Bank of India and have hiked their benchmark lending rates, which would result in increase in EMIs. 

The effective repo-based lending rate (RBLR) with effect from 7 December is 9.10% as per the revised repo rate (6.25 per cent), state-owned Bank of India posted on its website.

Private sector lender HDFC Bank has hiked its marginal cost of funds-based lending rate (MCLR) effective Wednesday.

The one-year MCLR has increased by 50 basis points to 8.60%, HDFC Bank website said.

ICICI Bank already raised its MCLR rate effective 1 December, ahead of the RBI’s monetary policy. Following the revision, the one-year benchmark rate was raised by 50 basis points to 8.40% from 7.90% earlier.

The benchmark one-year MCLR is used to price most of consumer loans such as auto, personal and home loans.

Earlier in the day, the RBI hiked the key repo rate by 35 basis points to 6.25%. This is the fifth straight increase since May.

Consequently, the standing deposit facility (SDF) rate is adjusted to 6% and the marginal standing facility (MSF) rate and bank rate to 6.50%.

Other banks are set to raise their lending rates as they undertake external benchmark-based lending rate (EBLR) and repo-linked lending rate (RLLR) hikes in line with the repo rate.

Housing demand could get immediately impacted. Said Tailwind Financial Service co-founder and joint managing director Vivek Goel, “The immediate short-term concern would be on housing demand and impact of higher EMIs on overall consumer discretionary spending."