RBI cuts repo rate to 5.5%—How it affects your EMIs
What's the story
The Reserve Bank of India has slashed the repo rate by 50 basis points to 5.5%. The move is likely to lower EMIs for existing borrowers and make new loans cheaper. The repo rate is the interest rate at which RBI lends money to commercial banks, and a reduction in this rate usually translates into lower interest rates on loans for consumers. However, fixed deposit investors could face declining returns as banks adjust rates in response to the policy changes
Home loan impact
Home loans
The RBI's decision to cut the repo rate is expected to bring down EMIs for existing borrowers and make new loans cheaper. For instance, if you have a ₹50 lakh home loan from HDFC Bank over 30 years at an interest rate of 8.7%, your current EMI would be ₹39,136. But with the interest rate dropping by 50 bps to 8.2%, your new EMI would be ₹37,346—saving you around ₹1,790 per month or nearly ₹21,480 annually.
Personal loan impact
Personal loans
The RBI's repo rate cut will also affect personal loans, but the savings may not be as significant as with home loans. For example, a ₹5 lakh personal loan at 12% for five years would have an EMI of ₹11,122. With the interest rate dropping by 50 bps to 11.5%, your new EMI would be ₹10,963—saving you around ₹159 per month or nearly ₹1,908 annually.
Future loans
Future personal loans
The impact of the RBI's repo rate cut on future personal loans will depend on individual bank decisions regarding EMI loan rate cuts. Loan interest rates comprise two parts: the Marginal Cost of Funds based Lending Rate (MCLR) and the spread. While MCLR is likely to be reduced after RBI's repo rate cut, the spread varies among banks and depends on how much of this interest rate cut is passed onto customers.