RBI Repo Rate Cut: Big Relief for Common Citizens – EMIs on Home and Car Loans to Decrease

In a significant announcement that brings major relief to the common man, the Reserve Bank of India (RBI) has reduced the repo rate by 25 basis points in its first monetary policy review of the year. With this change, the repo rate now stands at 6 percent. This move is expected to lower interest rates on home loans, car loans, and other floating-rate borrowings, thereby reducing monthly EMIs for millions of borrowers.

The update was officially announced by RBI Governor Sanjay Malhotra, who emphasized that this benefit will primarily apply to borrowers with floating interest rate loans.

What Does the Repo Rate Cut Mean for Your EMI?

This is the second time in five years that the central bank has slashed the repo rate, and it is set to bring substantial savings for loan holders. Here's how different loan amounts will be impacted:

Home Loan EMI Comparison – Before & After Repo Rate Cut

(Assuming 20-year tenure and 25 bps reduction)

• ₹30 Lakh Loan @ 8.5% Interest

  • Previous EMI: ₹26,035

  • New EMI: ₹25,562

  • Monthly Savings: ₹473

  • Annual Savings: ₹5,676

• ₹30 Lakh Loan @ 9% Interest

  • Previous EMI: ₹26,247

  • New EMI (post-cut): ₹25,071

  • Monthly Savings: ₹1,176

  • 20-Year Total Savings: ₹2.82 lakh

• ₹50 Lakh Loan

  • Previous EMI: ₹43,745

  • New EMI: ₹41,785

  • Monthly Savings: ₹1,960

  • 20-Year Total Savings: ₹4.70 lakh

• ₹70 Lakh Loan

  • Previous EMI: ₹60,243

  • New EMI: ₹58,499

  • Monthly Savings: ₹1,744

  • 20-Year Total Savings: ₹6.58 lakh

• ₹1 Crore Loan

  • Previous EMI: ₹87,490

  • New EMI: ₹83,570

  • Monthly Savings: ₹3,920

  • 20-Year Total Savings: ₹9.40 lakh

• ₹1.5 Crore Loan

  • Previous EMI: ₹1,31,235

  • New EMI: ₹1,25,355

  • Monthly Savings: ₹5,880

  • 20-Year Total Savings: ₹14.11 lakh

What is the Repo Rate?

The repo rate is the interest rate at which the RBI lends money to commercial banks. When this rate is lowered, banks can borrow funds at cheaper rates. In turn, banks may pass on the benefits to customers by lowering interest rates on loans such as housing, vehicle, and personal loans.

A reduction in the repo rate typically leads to lower EMIs, making borrowing more affordable for individuals and boosting liquidity in the market.

This decision by the RBI is seen as a step towards encouraging economic activity and easing the financial burden on households. Borrowers are advised to check with their banks regarding the transmission of the rate cut to their existing loans.