Repo Rate Impact on Loans: The Reserve Bank has reduced the repo rate by 25 basis points. This will make many loans, including home loans, cheaper. Find out how much you’ll save on your monthly EMI.
New Delhi: The Reserve Bank of India (RBI) cut the repo rate by 25 basis points (bps) at its Monetary Policy Meeting (MPC) on Friday, December 5. With this reduction, the central bank has reduced the repo rate by a total of 125 bps so far this year. Previous cuts were made by 25 bps each in February and April 2025, and by 50 bps in June. However, at the previous MPC meeting in October, the RBI had kept the repo rate unchanged. With today’s cut, the repo rate now stands at 5.25%.
Friday’s repo rate cut will directly impact floating-rate home loans, particularly those linked to the External Benchmark Lending Rate (EBLR). Interest rates on these loans will also be reduced. However, the impact of the home loan interest rate reduction will depend on how quickly banks pass on the benefits of this reduction to customers.
How much will you save on this loan?
1. A loan of ₹25 lakh, for 15 years, at an interest rate of 8.5%
Current EMI: ₹24,618
After deduction, EMI at 8.25%: ₹24,254
Total interest now: ₹19,31,328
After deduction, total interest at 8.25%: ₹18,65,632
Your savings: ₹65,696
2. A loan of ₹50 lakh, for 20 years, at an interest rate of 8.5%
Current EMI: ₹43,391
After deductions at 8.25%, EMI: ₹42,603
Total interest now: ₹54,13,879
After deductions at 8.25%, total interest: ₹52,24,788
Your savings: ₹1,89,091
3. Loan of ₹75 lakh, for 25 years, at an interest rate of 8.5%
Current EMI: ₹60,392
After deductions at 8.25%, EMI: ₹59,134
Total interest now: ₹1,06,17,609
After deductions at 8.25%, total interest: ₹1,02,40,128
Your savings: ₹3,77,481
Who will benefit the most?
The biggest beneficiaries of a repo rate cut are those with floating-rate home loans. These are those who have borrowed from banks under the EBLR (External Benchmark Lending Rate) after October 1, 2019. Nowadays, most home loans are floating-rate, directly linked to the repo rate. When the Reserve Bank of India reduces the repo rate, banks follow suit and reduce home loan interest rates. Borrowers directly benefit from a reduction in home loan interest rates, as their monthly EMIs are reduced.
Read More: Repo Rate Cut: RBI cuts interest rates by 25 basis points, your EMI will be reduced
