Here’s How RBI’s New Repo Rate Will Affect Interests on Home Loans

India’s monetary policy committee (MPC) voted to cut interest rates in response to a steeper-than-expected fall in inflation, and maintained a neutral policy stance.

(Photo: iStock)

After keeping its key policy rate unchanged at 6.25 percent for a long time, the Reserve Bank of India on Wednesday cut its repo rate by 25 basis points to 6.00 percent – the lowest since November 2010. With the RBI cutting the repo rate, borrowers, especially those with home loans, will get the benefit of lower EMIs.

Here’s what will change for people.

Here’s an example of how things will change.

Let’s assume someone takes a housing loan of Rs 1 lakh for a period of 10 years at 8.50 percent interest. This would imply an EMI of Rs 1,240. Over 10 years, the person would be paying Rs 48,783 as interest. But the 25 bps fall in the interest rate would bring down the EMI to Rs 1,227 and the total interest paid to Rs 47,183. Thus, the person will save Rs 1,600 in interests.

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