Rate cut will slash EMI on Rs 1 crore by around Rs 3,500 per month
This is an AI-generated image, used for representational purposes only.
MUMBAI: For home loan borrowers, the RBI's 50 basis point cut in the
repo rate
to 5.5% brings significant relief, reducing the EMI on a Rs 1 crore loan with a 20-year tenure by around Rs 3,100 per month.
Along with the repo cut, the central bank also slashed the cash reserve ratio (CRR) by 100 basis points, releasing Rs 2.5 lakh crore into the banking system.
This is expected to reshape deposit rates across the sector.
The CRR cut will be implemented in four equal tranches of 25 bps each, starting from the fortnights beginning Sept 6, Oct 4, Nov 1 and Nov 29.
As per RBI norms, floating-rate loans must be reset in line with the benchmark repo rate.
This means existing borrowers will see an automatic reduction in rates. However, new borrowers may not get the full benefit. Banks are expected to tweak the spread they charge over the repo rate to protect their margins instead of cutting lending rates by the full 50 bps.
To preserve profitability, banks are also likely to reduce returns on fixed deposits, especially with fresh liquidity being injected into the system.
This could make FDs less attractive to savers.
Meanwhile, competition in the home loan segment is intensifying, with smaller lenders offering cheaper rates than market leaders. Among public sector banks, Bank of India, Bank of Maharashtra, Central Bank of India and Union Bank of India are offering the lowest rates at 7.85% for loans up to Rs 30 lakh. Canara Bank, Indian Bank, Indian Overseas Bank and UCO Bank offer 7.90%—with Canara's rate applicable for loans above Rs 75 lakh, and others for loans up to Rs 30 lakh.
Among private lenders, South Indian Bank has the lowest rate at 8.30% for loans up to Rs 30 lakh. Karur Vysya Bank follows at 8.45%, while PNB Housing Finance and Tamilnad Mercantile Bank offer 8.50%. Bandhan Bank, Axis Bank and Karnataka Bank offer rates of 8.66%, 8.75% and 8.78%, respectively.
In the FD market, NorthEast Small Finance Bank offers the highest return at 9% for a tenure of 18 months and 1–2 days. Among public sector banks, Central Bank of India offers the top rate of 7.5% for a 3,333-day tenure. Bandhan Bank leads private banks (excluding small finance banks) with a 7.75% rate for one year.
Among major lenders, HDFC Bank and ICICI Bank offer 6.85% for tenures of 15 to 24 months. SBI and Bank of Baroda offer similar rates through special deposit schemes.
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