Higher EMI or longer tenure? Go by your financial wherewithal, say experts

Currently, a floating-rate loan appears a better bet than a fixed-rate peer

On August 18, 2023, the Reserve Bank of India (RBI) issued a circular titled “Reset of floating interest rate on equated monthly instalments (EMIs)-based personal loans”. Experts say that the latest rulings will make the resetting of rates more transparent and allow greater choice to borrowers.  

Give options to borrowers

Earlier, when the repo rate went up, banks would increase the tenure. When the headroom for increasing the tenure got exhausted, they would hike the EMI. All this would happen automatically.

The RBI has now made it mandatory for banks to ask borrowers which of the three options they prefer: