RBI Cuts Repo Rate by 0.25%, Impact on EMIs Explained
RBI Repo Rate Cut: The Reserve Bank of India (RBI) has announced a 0.25% cut in the repo rate. This decision was taken in the first meeting of the new governor, Sanjay Malhotra. Let’s know the full news.
RBI Repo Rate Cut: The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has announced its decision. RBI’s new Governor Sanjay Malhotra, in his first MPC meeting, announced a 0.25% cut in the repo rate. This decision, taken unanimously, will directly impact the common man’s finances. The repo rate cut will provide cheaper loans to banks, potentially leading to lower interest rates on home loans, auto loans, and other credit facilities. The biggest benefit will be for those already repaying loans or planning to take out new ones. Let’s understand how this decision will affect your EMI and your annual savings.
Impact on Home Loan EMIs
If you have taken a home loan for a 20-year period, understand how much your monthly installment will decrease with a 0.25% reduction in the interest rate through this calculation:
Loan Amount
Previous EMI (8.5% interest rate)
New EMI (8.25% interest rate)
Annual Savings
₹20 Lakhs
₹17,356
₹17,041
₹3,780
₹30 Lakhs
₹26,035
₹25,562
₹5,676
₹50 Lakhs
₹43,391
₹42,603
₹9,456
If you have taken a ₹50 lakh home loan for 20 years, your EMI was ₹43,391 at the current interest rate. But now it will decrease to ₹42,603. This means your monthly savings will be ₹788, and your annual savings will be ₹9,456. Similarly, there will be annual savings of ₹5,676 on a ₹30 lakh home loan and ₹3,780 on a ₹20 lakh home loan.
Impact on Auto Loan EMIs
If you are planning to take an auto loan to buy a new car or are already repaying one, this cut (RBI Repo Rate Cut) will also affect your EMI.
Loan Amount
Previous EMI (9.2% interest rate)
New EMI (8.95% interest rate)
Annual Savings
₹3 Lakhs
₹6,257
₹6,220
₹444
₹5 Lakhs
₹10,428
₹10,367
₹732
₹10 Lakhs
₹20,856
₹20,734
₹1,464
If you have taken a ₹10 lakh auto loan for 5 years, your current EMI was ₹20,856. Now it will decrease to ₹20,734, resulting in annual savings of ₹1,464. Similarly, there will be savings of ₹732 on a ₹5 lakh loan and ₹444 on a ₹3 lakh loan.
Should you transfer your loan?
If your loan is at older interest rates, you can consider the option of a loan transfer (Balance Transfer). To take advantage of the decrease in interest rates (RBI Repo Rate Cut), home loans or auto loans can be transferred to a bank or NBFC with lower interest rates. However, it is essential to carefully understand the pre-payment charges and other terms before transferring.
Why is the RBI’s decision important?
The repo rate cut will make loans cheaper, increasing liquidity in the market and boosting economic activity. This step has been taken to accelerate the Indian economy. Although this repo rate (RBI Repo Rate Cut) cut is small, it will directly impact the finances of millions. If you are planning to take out a new loan, this may be the right time, as interest rates may decrease further.
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