RBI’s 50 bps repo rate cut: Check how much your EMI will drop on a Rs 50 lakh home loan over 20 years — Full calculation

The Reserve Bank of India (RBI) on Friday cut the repo rate by 50 basis points (0.50%). This is the third consecutive time that the central bank has reduced the repo rate this year. Now this interest rate has come down to the lowest level in over three years. This will have a significant impact on the EMIs of home loans, personal loans, and other floating-rate loans.

In its second bi-monthly monetary policy review decision of this financial year on Friday, the central bank slashed the key interest rate by 50 bps to 5.5%, giving much-needed relief to loan borrowers.

Earlier in the monetary policy meetings of February and April 2025, the RBI had twice cut the repo rate by 0.25% each to bring it to 6%. The cut in February was the first since May 2020.

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Experts are of the view that this move of the RBI has brought relief, especially to those taking home loans, car loans and consumer loans. Some reports suggest that the RBI may cut the repo rate by a total of 100 basis points in this financial year alone.

BankBazaar.com CEO Adhil Shetty said, “Today’s 50 bps rate cut is likely to push home loan rates closer to the psychologically important sub-8% level. The repo rate now stands at 5.50%, having been cut by a cumulative 100 bps since February 2025. The lowest rates in the market are already at 7.85%, largely available to prime borrowers with credit scores above 750, and often in refinance or balance transfer cases. A further rate cut could see sub-8% rates becoming more widespread — something we haven’t seen since early 2022.”

He, however, said that the transmission of rate cuts remains uneven. “Borrowers with repo-linked home loans will see the fastest and fullest pass-through. But loans taken pre-2019, especially with public sector banks, continue to be linked to older benchmarks like the MCLR or even the Base Rate. These borrowers will not benefit automatically from today’s cut.”

If you’re paying 50 basis points or more above the lowest available rates, and especially if you’re in the early years of your tenure, it’s worth exploring a refinance to a repo-linked loan, Shetty said adding that this can help bring down your interest cost significantly over the life of the loan.

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The RBI has cut the repo rate thrice this year, bringing down the rate by 100 bps cumulatively to 5.5%. Check how much impact these three rate cuts may have on a home loan of Rs 50 lakh at the original 8.5% interest, assuming the lending bank passes on the entire benefit to the consumer.

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How do banks decide your home loan rate?

The final interest rate of a home loan is decided in three parts:

Repo Rate – which is decided by RBI

Bank Spread – Bank’s own margin

Credit Risk Premium – Additional charge based on the customer’s credit score

However, after the cuts in February and April, all banks have given their partial benefit to customers while taking a new loan. But if the full benefit of the 100 bps cut now reaches the customers, then there will be more relief in EMIs.

Can there be further cuts?

Reports and market signals are indicating that with inflation coming under control, RBI can reduce rates further. This will make taking loans cheaper and the burden on the borrowers’ pockets will be less.

What will be the impact on floating rate loans?

All new floating rate loans taken after October 1, 2019 are linked to an external benchmark, in which the repo rate is considered as the basis in most cases. As the repo rate decreases, the loan EMI also reduces — although this reduction depends on the banks’ interest reset cycle (usually every 3 months).