RBI Cuts Repo Rate To 5.50%: What This Means
Mumbai:
The Reserve Bank of India (RBI) announced a 50 basis-point repo rate cut to 5.50 per cent this week - from the earlier 6 per cent. RBI Governor Sanjay Malhotra declared the higher-than-expected repo rate cut after the RBI MPC meeting. This is the third consecutive rate reduction since February.
The repo rate cut means the loan interest must also fall if it's repo-linked.
The repo rate is the interest rate at which the RBI lends money to commercial banks. A reduction in this rate makes borrowing cheaper for banks, which in turn allows them to offer loans to customers at lower interest rates. This directly impacts borrowers, especially those with home loans linked to repo-based lending rates (RBLR).
An X user and an expert, Vivek Khatri, explained the implications of the repo rate cut and what to do about it.
According to Mr Khatri, the repo rate cut to 5.50 per cent means that if a person has a Rs 50 lakh loan, they can save Rs 1,569 per month, Rs 18,828 per year, and Rs 2.6 lakh in loan tenure. However, the twist is that there are only 90 days to claim it.
"Your bank won't remind you. Most people will miss it and lose lakhs. Don't be one of them," he said.
He also noted the list of steps to take to make sure the loan interest is repo-linked.
Step 1: Ask the question
Ask the bank if the loan is linked to the repo rate or the Marginal Cost of Funds based Lending Rate (MCLR). If the loan is on MCLR or fixed rate, the rate drop can take up to six to 12 months. In this case, the bank has full control with no fixed reset rule, Mr Khatri said.
"If the answer is repo-linked, then proceed. If MCLR, ask if it can be switched to repo-linked and what are the charges," he said.
Step 2: Find the reset date
According to Mr Khatri, the repo-linked loans reset every three months, but not instantly after the RBI policy.
In case of missing the reset date, file a complaint online on http://cms.rbi.org.in (Select Bank - Loan/EMI - Interest Rate Issue)
Step: Calculate EMI drop
The expert urged people to calculate the EMI drop using the RBI's EMI calculator.
When will RBI cut repo rate again?
Mr Khatri, in his post, said that the latest repo rate cut took place because of the below target 4.5 per cent inflation, GDP of 6.7 per cent in Q1 FY26, and a healthy liquidity.
If the inflation stays low, the next repo rate cut may take place in August, he said.
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