In an unexpected move on Friday, the Reserve Bank of India (RBI) announced a 50 basis points reduction in the repo rate, bringing it down to 5.50 percent. Following the three-day Monetary Policy Committee (MPC) meeting, RBI Governor Sanjay Malhotra revealed a larger-than-anticipated rate cut. Experts say this decision will impact bank fixed deposit holders and new home loan borrowers.
What Are Experts Saying?
Experts say that if banks pass on the benefits, the RBI’s decision to reduce the repo rate is expected to help new home loan borrowers by lowering their monthly EMIs. For example, a borrower with a loan of ₹7.5 crore over 20 years could see their monthly EMI decrease by around ₹2,000, according to home loan EMI calculators. However, analysts also warn that fixed deposit (FD) investors may face lower returns across different tenors following the repo rate cut by the RBI.
Cut RBI Repo Rate Impact on Home Loan
Annuj Goel, Managing Director at Goel Ganga Developments, explained how the RBI’s repo rate cut would impact monthly home loan EMIs. According to a media report, he said, “Although the RBI’s 50 bps repo rate cut has been bold and visually striking in terms of allowing savings for its lenders, the repo rate N/O is at 5.5%, so home loan borrowers can save from the increase.”
Here’s how the deal works: if you took a loan of ₹50 lakh for 20 years, you could save nearly ₹4.7 lakh over the entire loan tenure, which translates to roughly ₹1,960 less in your monthly EMI.
Aman Gupta, Director of RPS Group, explained the relief for home loan borrowers with a ₹30 lakh loan over 20 years. He said, “Home loan borrowers with a 30 lakh loan of 20 years will see decrease in their EMIS of about 1,176 per month, and the best part is borrowers then have the choice they can either reduce their EMIS or as being discussed here, retain their current EMI repayments to reduce the length of tenure and hence earn a greater interest saving,” as per media report.
New House Loan with New Interest Rate
“The RBI has cut the repo rate by 25 bps in February and April also,” stated Pankaj Mathpal, MD & CEO of Optima Money Managers, regarding the total benefit that a new house loan borrower would receive following the RBI’s repo rate cut in 2025. Since the RBI has reduced the repo rate by 100 basis points (25 +25 +50) in 2025, those who have put off purchasing a home in recent quarters now have a fantastic chance to do so because they will receive a monthly EMI reduction of approximately 3,800 to 74,000 on a home loan of 50 lakh for 20 years.
Negative Impact on FD Returns
Pankaj Mathpal of Optima Money Managers highlighted the potential downside of the repo rate cut on bank FD returns. He noted that banks are likely to lower FD rates across all tenors after notifying their customers, as per media report. Therefore, senior citizens and other FD investors are advised to lock in their deposits now, as existing FDs will remain unaffected by the rate change. Those who miss this opportunity can also consider small savings schemes or time deposits offered by the post office.