RBI Rate Cut: Home Loan EMIs To Come Down; How Much Will You Save?
Repo Rate Today: The RBI has announced the repo rate cut in its April 2025 MPC, making EMIs for home, auto, and personal loans more affordable, benefiting both existing and new borrowers.
RBI Repo Rate Cut Impact: The Reserve Bank of India (RBI) on Wednesday announced another reduction in the repo rate by 25 basis points, which is welcome news for those paying Equated Monthly Installments (EMIs). This decision means that existing customers will see a decrease in their EMIs, and new borrowers will soon find home loans, auto loans, and personal loans more affordable.
With this recent cut, the repo rate— the interest rate at which the RBI lends to banks— now stands at 6 percent, down from 6.25 percent. This marks the second interest rate cut by the RBI since the COVID-19 pandemic began in May
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Also See: Repo Rate 2025 Live
Between May 2020 and April 2022, the RBI kept the repo rate steady at 4 percent. From April 2022 to February 2023, the RBI gradually increased the policy rates to 6.5 percent, maintaining this rate for two years until the recent reduction.
As the RBI lowers key policy rates, banks are expected to follow suit.
RBI Repo Rate Cut 2025 Impacts: How Much Will You Save?
For example, consider a Rs 50 lakh home loan from HDFC Bank over 30 years at an 8.70 percent interest rate:
Current EMI: Rs 39,157
If the interest rate drops by 25 basis points to 8.45 percent, the EMI becomes Rs 38,269, resulting in savings of Rs 888 per month.
If the interest rate drops by 50 basis points to 8.20 percent, the EMI becomes Rs 37,388, resulting in savings of Rs 1,769 per month.
This translates to over Rs 21,000 saved per year with just a 0.5 percent rate cut. While this might not seem like a significant amount for some, it can make a substantial difference for many borrowers, especially over a 20- or 30-year loan term.
These are rough estimates, and the final savings on EMIs will depend on individual bank decisions regarding EMI loan rate cuts. Loan interest rates consist of two components— the Marginal Cost of Funds based Lending Rate (MCLR) and the spread. While the MCLR is likely to be reduced following the RBI’s repo rate cut, the spread varies among banks and depends on how much of the interest rate cut is passed on to customers.
Also See: Nifty Bank Slides Over 350 Points, Banking Stocks Fall Up To 2% As RBI Cuts Repo Rate
Repo Rate 2025 Impact On Personal Loan
If you have a personal loan of Rs 5 lakh at a 12 percent interest rate for a five-year term, a 0.25 percent rate cut would reduce your EMI from Rs 11,282 to Rs 11,149, saving you Rs 133 a month or Rs 1,596 a year.
Existing borrowers with floating interest rates will benefit from the rate cuts, but those with fixed interest rates will see no change in their EMIs.
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