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Good news for UAE-based NRIs after rate hike in India

Dubai - Reserve Bank of India hiked repo rate by 25 basis points.

The cost of borrowing for Indians increased on Wednesday after the Reserve Bank of India (RBI) hiked benchmark interest rates by 25 basis points to 6.5 per cent (detailed report).

Analyst said that this hike by RBI will not majorly affect non-resident Indians in the UAE, except those who are holding floating mortgage rates back home in India because most of the existing auto and personal loans are obtained at a fixed rates.

Vijay Valecha, chief market analyst at Century Financial Brokers, said NRIs can, however, benefit from a higher interest rate on fixed deposits.

The hike in interest rate is in line with the predictions made by the analysts. Out of 53 economists polled by Bloomberg, 40 had forecast hike in rates. On Tuesday, five out of six policy members of RBI voted in favour of rate hike.

Replying to a question about whether borrowing is cheaper in the UAE or in India for NRIs, Valecha said: "It is cheaper to get a loan in UAE than in India as of this hike, although the US Federal Reserve is supposed to hike rates much more aggressively than the RBI. All kinds of loans whether it is personal, auto or mortgage will be impacted by this hike. For people having existing loans most of the personal and auto loans are usually at fixed rates, hence the biggest impact comes to mortgage loans."

The repo rates are also hiked to contain inflation in the country.

Given the increase in crude prices and higher inflation expectations, Valecha sees one or two more rate hikes by the RBI this year.

waheedabbas@khaleejtimes.com