RBI Cuts Repo Rate by 50 bps in June 2025: Will Your Home Loan EMI Decrease?

In a surprising move that has caught the attention of both borrowers and lenders, the Reserve Bank of India (RBI) has slashed the key repo rate by 50 basis points (bps), bringing it down to 5.5%. This marks the third rate cut in a series of adjustments aimed at stimulating economic growth. With this reduction, the repo rate reached its lowest level in nearly 3 years. 

But what does this mean for your home loan? Will this rate cut translate into a reduction in your monthly EMI payments for your home loan? 

Let’s delve into how this change could impact your loan repayments and what steps you may need to take.

RBI Implements 50 bps Rate Cut 

The Reserve Bank of India (RBI) has announced a 50 basis points cut in the repo rate, reducing it from 6% to 5.5% during its June 6, 2025, monetary policy meeting. The decision, led by Governor Sanjay Malhotra and the Monetary Policy Committee (MPC), marks the third rate cut this year. With the current 50-basis-point cut, the repo rate has fallen by 100 basis points overall in the first half of 2025.

This latest cut comes as retail inflation remains below 4% for the third straight month, aligning with the RBI’s inflation target and creating favourable conditions for monetary easing. The move has heightened expectations of reduced borrowing costs, particularly for home loans.

Impact on Home Loan EMIs and Lending Rates

The repo rate, which is the rate at which the RBI lends to commercial banks, directly influences lending rates across the financial system. Following the 50 bps reduction, the cost of borrowing for banks is likely to decline, and this is likely to be reflected in lower interest rates for borrowers over time.

For homebuyers with floating-rate loans, this cut may result in a decrease in EMIs, though the extent and speed of this relief will depend on the bank's transmission of the rate cut. Historically, the pass-through of repo rate changes has varied across institutions and loan tenures.

How Much Can Home Loan Borrowers Save After the Latest Repo Rate Cut by RBI?

For a borrower with a ₹75 lakh home loan, the original EMI is ₹65,087 per month. Over the course of the loan, the total interest payable is ₹81,20,818, leading to a total payable amount of ₹1,56,20,818. Loan tenure is of 20-years. Before the rate cut cycle began, the interest rate stood at 8.5%. After a rate cut of 100 basis points, assuming the bank transmits the change fully, the new rate would be 7.5%.

However, with a total of a third consecutive cut leading to a 100 bps rate cut so far, with this the new rate would be 7.5% and the EMI is reduced to ₹60,419 per month. This brings the total interest payable down to ₹70,00,677, resulting in a total payable amount of ₹1,45,00,677.

This reduction leads to an interest savings of ₹11,20,141, significantly lowering the overall financial burden on the borrower.

Read More: Auto Stocks Surge After RBI’s Big Rate Cut: Ashok Leyland, Hero MotoCorp Among Top Gainers! 

What Borrowers Should Know About EMI Adjustments

For existing home loan borrowers with floating interest rates, the latest rate cut will likely result in a lower EMI or a shorter loan tenure, depending on the lender's adjustment model. However, the changes are not always immediate and may take 1 or 2 billing cycles to reflect.

New borrowers may find more competitive loan products in the market, as lenders recalibrate their offerings to align with the revised repo rate. While some institutions may wait for further policy clarity before making rate changes, others are expected to act swiftly to attract customers.

Conclusion

The RBI’s decision to cut the repo rate by 50 bps to 5.5% is a clear signal of its intent to stimulate growth and reduce the cost of credit. As banks gradually adjust their lending rates, many home loan borrowers may soon experience a decrease in their EMIs, especially those with floating rate loans. While the degree of benefit will vary, this move reinforces a borrower-friendly environment and may trigger increased activity in the housing market.

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