RBI Cuts Repo Rate By 50 bps; Home, Personal Loan EMIs May Come Down In Savings Boost
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RBI Repo Rate Cut: cut the repo rate by 50 basis points, reducing it to 5.50 percent. This will lower EMIs for existing customers and make new loans more affordable.
RBI Repo Rate Cut Impact: The Reserve Bank of India (RBI) on Friday announced another reduction in the repo rate by 50 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 5.50 percent, down from 6 percent. This marks the third interest rate cut by the RBI since the COVID-19 pandemic.
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 reductions.
Current EMI: Rs 39,136
Scenario:
As interest rate drops by 50 bps to 8.20%
New EMI: Rs 37,346
Monthly Savings: Rs 1,790
Scenario:
As interest rate drops by 50 bps to 11.50%
New EMI: Rs 10,963
Monthly Savings: Rs 159
Annual Savings: Rs 1,908
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.
First Published:
June 06, 2025, 10:10 IST
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