The finance ministry claimed on Wednesday that home and personal loan rates were not likely to rise because of the 0.25% hike in the repo rate by the Reserve Bank of India (RBI). It said an increase in the short-term lending rate was not intended to make loans costlier, but to make banks self sufficient for lending.

Repo rate hike is not intended to make loans expensive, said minister of state for finance PK Bansal, responding to a query on whether loans would become costlier after the revised repo rate on Tuesday.

Boards of respective banks have to take decisions on lending rates and the government has no role in it, he said. Mr Bansal said the 0.25% increase in repo rate to 7.25% is intended to contain inflation and manage liquidity.

Raising the repo rate is only a signal that getting liquidity from RBI would be expensive, RBI governor YV Reddy said after releasing the annual policy review statement on Tuesday.

He said there was a need for greater fairness and transparency in regard to the housing sector because of complaints in this regard. Banks with enough liquidity say they do not anticipate any immediate rate hike, including in the home and auto loan segment.

Instead, they were of the view that home loans above Rs 20 lakh, personal and consumer loans, loans for investing in equity market may be repriced by banks facing liquidity problem and borrow from RBI to meet short-term requirements.

RBI wants banks to lend to the extent of their own resources mobilised through deposits and not be aggressive in lending to the non-productive sectors.