Repo rate is the interest rate at which the Reserve Bank of India (RBI) lends to banks in the country. When the RBI increases the repo rate, it makes borrowing costlier for banks and NBFCs, which then pass it on to the consumers by increasing their lending rate. As a result, EMIs become higher, and payments go up, which leads to the repayment period getting longer. Here are some of the impacts of an increase in repo rate:

• Increased borrowing costs: Higher repo rates lead to increased borrowing costs for commercial banks, which then pass it on to the consumers by increasing their lending rate.

• Higher EMIs: As and when interest rates rise, EMIs also become higher, and thereby, payments go up, which then leads to the repayment period getting longer.

• Reduced demand for goods and services: People are discouraged from making large purchases when borrowing costs rise, which reduces the demand for goods and services. This messes up the supply and demand chains.

• Impact on loans: A rise in repo rate increases the rate of interest on all types of loans such as personal loans, business loans, car loans, home loans, etc. .

• Impact on the stock market: Every time the RBI raises the repo rate, an immediate impact is seen on the stock market. Fixed income securities become attractive, and people are encouraged to invest in bonds, fixed deposits, etc. .

In conclusion, an increase in repo rate leads to increased borrowing costs, higher EMIs, reduced demand for goods and services, and impacts the stock market.