You might be aware or you might still be lacking the information, whichever is the case the fact is - The RBI or Reserve Bank of India (the supreme banking institution of India) controls the monetary policies in order to regulate the credit, banking and the inflation in our country. Furthermore, the RBI, in a bid and quest to ensure a balanced supply of money, it oversees the functions of financial institutions affecting the mandate on which you get loans and make investments. So, when you apply for a loan, let’s say a Personal Loan online - the applicable interest rate is subject to the lender’s policies as well as the Statutory Liquidity Ratio (SLR), Cash Reserve Ratio (CRR), and the Repo Rate; which are decided by the RBI.
Proceeding further, let’s talk about how SLR, CRR, and repo rate affects your personal loan.
Case 1: If RBI increases/Decreases the Repo Rate
Repo rate is the rate at which banks borrow money from the RBI. Hence, if the RBI reduces the repo rate, the lending capacity of the bank's increases and they reduce their rate for a personal loan and vice versa.
Case 2: If RBI increases/decreases CRR
CRR is the cash ratio which Indian banks/NBFCs are supposed to maintain with the RBI. If the RBI increases this ratio, banks will have lesser cash with them and hence their lending capacity decreases, leading to an increase in interest rates and vice versa.
Case 3: If the RBI Increases/Decreases the SLR
SLR is the percentage of money that Indian banks are supposed to invest in Central or State Government securities. For example, if you invest 1000 rupees with banks, the bank will have to deposit Rs 195 (as per the current SLR) in government bonds and securities, meaning the banks will have the lesser cash to lend. Hence, the interest rate for a personal loan will increase and vice versa.
To know more about SLR, CRR, and Repo rate/ Reverse repo rate in detail; refer to the article: How SLR, CRR and RBI repo rate impact your Personal Loan EMI
In the end, in order to ensure that your EMIs stay pocket-friendly, try borrowing an instant Personal Loan from NBFCs.