How the RBI Repo Rate Changes Your Home Loan EMI
Updated 2026-10-26
News about the RBI changing the repo rate often ends with "your EMI will go up" or "your EMI will come down". Here is how a repo rate change reaches your loan.
What the repo rate is
The repo rate is the rate at which the Reserve Bank of India lends short-term money to banks. When it is low, money is cheap for banks, and they can lend to you at a lower rate. When it is high, borrowing costs more all around. The RBI changes it to manage prices and growth. As of October 2026 it is 5.50%. You can see every change since 2014 on our repo rate history page.
Why your loan follows it
Since October 2019, banks must link new floating-rate home loans to an external benchmark. Most choose the repo rate. Your loan rate is then the repo rate plus a fixed margin, called the spread. For example, if the repo rate is 5.50% and your spread is 3.00%, you pay 8.50%.
When the repo rate moves by 0.25%, your rate moves by 0.25%. The spread stays the same unless the bank changes it for a reason such as a change in your credit profile.
Banks must reset the rate at least once every three months. So a change may take up to a quarter to reach you. Check your loan agreement for the reset date.
Older loans linked to MCLR or a bank's base rate change more slowly, often once a year. You may be able to switch to the repo-linked rate by paying a small fee.
EMI or tenure?
When your rate changes, the bank can do one of two things. It can change your EMI and keep the tenure. Or it can keep the EMI and change the tenure. Many banks do the second by default, which is easy to miss.
If rates rise and your EMI stays the same, your loan quietly gets longer. A big enough rise can push the tenure past what the bank will allow, and then they will ask for a higher EMI. If rates fall and the EMI stays the same, your loan ends sooner, which saves more interest than a lower EMI does.
A worked example
Take a ₹50 lakh loan for 20 years at 8.5%. Your EMI is about ₹43,391.
The RBI cuts the repo rate by 0.25% and your bank passes it on. Your rate becomes 8.25% and the EMI falls to about ₹42,603. That is ₹788 less each month, or about ₹9,500 a year. Over the loan, if you kept paying the old EMI of ₹43,391, you would finish earlier and save interest.
Now suppose the rate rises by 0.25% instead, to 8.75%. The EMI rises to about ₹44,185. You pay about ₹800 more a month. A rise of one full percentage point adds roughly ₹3,200 a month on this loan.
What you can do
- Know your spread. Ask the bank what benchmark and spread your loan has.
- Check what happens on a change. Ask whether they change the EMI or the tenure.
- Keep your EMI the same when rates fall. You will pay off the loan sooner.
- Keep a buffer. Choose a loan where a one point rise would not strain your budget.
- Compare spreads. If your spread is much higher than new borrowers get, ask for a cut or consider a balance transfer.
Try it yourself
Check our repo rate history to see how rates have moved. Then use the EMI calculator, change the rate by 0.25% or 0.5%, and watch your EMI and total interest change. The "what if" section shows a range of rates side by side.