Will Your Loan EMIs Fall? What Future Repo Rate Cuts May Mean For Borrowers

The Reserve Bank of India (RBI) has decided to hold the key repo rate steady during its most recent monetary policy committee (MPC) meeting. However, borrowers hoping for lower loan repayments may still have reasons to remain optimistic. With three more MPC meetings remaining in the current financial year, financial experts suggest there’s still a possibility of interest rate cuts in the near future. If the RBI decides to reduce the repo rate by up to 50 basis points, it could result in meaningful savings on home, auto, and personal loans for borrowers.

Current Repo Rate Remains Steady Amid Global Uncertainty

The latest policy meeting saw the RBI retain the repo rate at 5.5 per cent, halting the earlier streak of cumulative cuts totalling 100 basis points this year. RBI Governor Sanjay Malhotra attributed this decision to ongoing global tariff tensions, particularly with the United States, which have added uncertainty to the economic outlook.

As a result, borrowers with repo rate-linked loans will not see any immediate changes in their equated monthly instalments (EMIs). That said, the possibility of further rate reductions remains open, with the next MPC meeting scheduled for the end of September and two more meetings in December and February respectively.

Possible EMI Impact If RBI Cuts Rates Further

Financial analysts believe that any rate cut in the range of 25 to 50 basis points could provide considerable relief to borrowers. Let’s explore how such reductions would influence EMIs across home, auto, and personal loans, based on current interest benchmarks.

If The Repo Rate Drops By 0.25%

For a 20-year home loan at a current interest rate of 7.5 per cent, the impact on monthly EMIs could be notable

• ₹20 lakh loan: Monthly EMI could fall from ₹16,112 to ₹15,808, resulting in annual savings of ₹3,648
  
  
  
• ₹30 lakh loan: EMI may drop from ₹24,168 to ₹23,711, saving ₹5,484 annually
  
  
  
• ₹50 lakh loan: EMI may reduce from ₹40,280 to ₹39,519, saving up to ₹9,132 a year
  
  
  

Similarly, auto loan borrowers taking out 5-year loans at 9 per cent interest could benefit as follows

• ₹3 lakh loan: Annual savings of ₹444
  
  
  
• ₹5 lakh loan: Annual savings of ₹720
  
  
  
• ₹10 lakh loan: Annual savings of ₹1,452
  
  
  

For a one-year personal loan at 10.10 per cent interest, borrowers could expect

• ₹2 lakh loan: Annual savings of ₹276

₹3 lakh loan: Savings of ₹420

₹5 lakh loan: Around ₹696 saved in a year

If The Repo Rate Is Cut By 0.50%

A larger rate cut would naturally lead to greater reductions in EMIs. For instance, a 20-year home loan could yield significant annual benefits

• ₹20 lakh loan: EMI may reduce to ₹15,506 from ₹16,112, leading to savings of ₹7,272
  
  
  
• ₹30 lakh loan: EMI may drop to ₹23,259, offering savings of ₹10,908

₹50 lakh loan: Borrowers could save up to ₹18,180 a year as EMI drops to ₹38,765

For auto loans under similar rate cut conditions

• ₹3 lakh loan: Annual EMI savings of ₹876
  
  
  
• ₹5 lakh loan: Reduction of ₹1,452 annually
  
  
  
• ₹10 lakh loan: Potential savings of ₹2,892 in one year

Meanwhile, personal loans of shorter tenure would also benefit

• ₹2 lakh loan: EMI may reduce enough to save ₹552
  
  
  
• ₹3 lakh loan: Yearly saving of ₹840
  
  
  
• ₹5 lakh loan: Savings could touch ₹1,392
  
  

Rate Pause Doesn’t Rule Out Future Relief

According to financial experts, the central bank’s decision to pause does not signal the end of accommodative measures. Global economic developments, inflation trends, and domestic growth indicators will continue to influence RBI’s stance in upcoming MPC meetings. If conditions ease or inflation moderates, repo rate cuts could still be introduced, bringing borrowing costs down.

Borrowers are advised to stay informed and consider repo rate-linked loans for greater flexibility in adjusting to future changes. Those planning new loans may benefit by comparing current floating and fixed rate options and recalibrating their financial plans accordingly.

While the current policy pause means no immediate change in EMIs for existing borrowers, the possibility of interest rate cuts in the upcoming policy cycles could bring welcome savings for millions of loan holders. Whether it’s a home, auto, or personal loan, even a small rate cut can lead to thousands of rupees in yearly savings.

Disclaimer: This article is for informational purposes only. It does not constitute financial advice. Readers are encouraged to consult certified financial professionals before making any investment or loan-related decisions. EMI savings mentioned are illustrative and may vary depending on lender terms, credit profile, and other factors.