Repo rate decisions, explained: what actually moves your EMI
Most floating-rate home loans now track the repo rate. Here is how a 0.25% change reaches your monthly payment, and the choice you get when it does.
What it is
The repo rate is what the Reserve Bank of India charges banks to borrow overnight. Its Monetary Policy Committee reviews it six times a year.
Since October 2019, new floating-rate retail loans from banks have had to be linked to an external benchmark. For most home loans, that benchmark is the repo rate.
How it reaches you
Your rate is the benchmark plus a fixed spread. When the repo moves, the bank must pass it on at your next reset, which happens at least once every three months.
At the reset, you can choose: keep the EMI and extend the tenure, or keep the tenure and change the EMI. Ask your lender which one it applied.
What 0.25% is worth
₹50 LAKH LOAN · 20 YEARS
| Rate | Monthly EMI | Total interest | Change in EMI |
|---|---|---|---|
| 8.25% | ₹42,603 | ₹52.2 lakh | — |
| 8.50% | ₹43,391 | ₹54.1 lakh | +₹788 |
| 8.75% | ₹44,186 | ₹56.0 lakh | +₹794 |
| 9.00% | ₹44,986 | ₹58.0 lakh | +₹801 |
Calculation: TheRealtyNomics, standard reducing-balance EMI. Excludes fees and insurance.
Going from 8.50% to 8.75% adds ₹794 a month. If your bank keeps the EMI fixed instead, the same change stretches a 20-year loan by about 12 months.
What to do
Check your loan statement for the benchmark and the spread. If your loan is still on an older internal benchmark such as MCLR, ask what switching would cost.
Sources
- RBI: external benchmark lending rate circular (2019)
- RBI: reset of floating interest rates on EMI-based loans (Aug 2023)
Educational, not financial advice. Rates and rules change; check the source before acting.
