RBI Cuts Repo Rate Again; Home Loan EMIs Set To Drop, Major Savings Expected

New Delhi, 6th June 2025: In a move aimed at boosting economic activity, the Reserve Bank of India (RBI) has once again reduced the repo rate—marking the third cut this year. The central bank has slashed the rate by 50 basis points, bringing the total reduction to 100 basis points in 2025 so far. This change is expected to directly impact household finances, particularly in terms of home loan EMIs and fixed deposit interest rates.

A reduction in the repo rate typically leads to lower interest rates on loans, which translates into lower EMIs for borrowers. If banks choose to pass on the full benefit of this rate cut to customers, the financial relief for borrowers could be substantial.

According to a study conducted by BankBazaar.com, three loan amounts were analyzed—₹25 lakh, ₹50 lakh, and ₹1 crore—with a loan tenure of 20 years. If the interest rate drops from 8.5% to 7.5%, matching the repo rate reduction, significant savings are expected across all categories.

For a ₹25 lakh home loan, the current EMI at 8.5% interest stands at ₹21,695.58. If the rate reduces to 7.5%, the EMI drops to ₹20,139.83—resulting in a monthly saving of ₹1,555.75. Over 20 years, this would save the borrower approximately ₹3.73 lakh in total interest.

A ₹50 lakh loan currently attracts an EMI of ₹43,391.16 at 8.5%. With the reduced rate of 7.5%, the EMI would come down to ₹40,279.66, saving ₹3,111.50 per month. Over the loan period, this amounts to a total interest saving of ₹7.46 lakh.

Similarly, for a ₹1 crore home loan, the EMI at 8.5% is ₹86,782.32. If the interest rate drops to 7.5%, the EMI would reduce to ₹80,559.32—a monthly saving of ₹6,223. Over the full term, the borrower could save nearly ₹14.93 lakh in interest.

While the actual benefits will depend on individual bank policies and how much of the repo rate cut is passed on to customers, borrowers stand to gain significantly if banks revise their lending rates accordingly.