Fuel Price Shock May Push Loan EMIs Higher

India’s middle-class families could soon face a double financial blow as rising fuel prices threaten to increase both daily expenses and bank loan EMIs. Escalating tensions in the Middle East and supply disruptions around the Hormuz Strait have already pushed up global crude oil prices, directly impacting fuel rates across India.

Petrol and diesel prices have reportedly increased by nearly ₹3 per litre, while CNG prices have also risen by around ₹2. The immediate impact is visible on transportation, food delivery, logistics and essential commodities, all of which are becoming more expensive. However, economists warn that the bigger concern could be the Reserve Bank of India’s next move on interest rates.

Why Rising Inflation Can Increase Your EMI

Whenever inflation rises sharply beyond the RBI’s comfort range of 4% to 6%, the central bank often considers increasing the repo rate to control excess liquidity and stabilize prices.

The repo rate is the interest rate at which the RBI lends money to commercial banks. If the RBI raises this rate, banks usually pass the burden on to customers by increasing lending rates on home loans, vehicle loans and personal loans.

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This means borrowers with floating interest rate loans may soon see their monthly EMI increase significantly.

How Much Can Your EMI Rise?

Financial experts say that even a small repo rate hike can impact long-term borrowers heavily. For example, if a borrower has a ₹30 lakh home loan and interest rates rise by just 0.5%, the monthly EMI could increase by several thousand rupees over the repayment period.

In some cases, banks may keep the EMI unchanged but extend the loan tenure, forcing customers to pay higher overall interest.

Double Pressure on Household Budgets

The impact of rising fuel prices does not stop at transportation costs. Increased diesel and petrol prices also raise the cost of groceries, public transport, food items and everyday essentials. At the same time, a possible repo rate hike can make borrowing costlier.

As a result, consumers may face pressure from both sides — higher daily living expenses and increased loan repayment obligations.

RBI’s Next Move Under Close Watch

With inflation concerns mounting and global geopolitical tensions affecting energy markets, all eyes are now on the RBI’s upcoming monetary policy decisions. Borrowers, especially those with floating-rate loans, are expected to closely monitor whether the central bank decides to raise the repo rate in the coming months.