Key takeaways
- The repo rate is the rate at which RBI lends to commercial banks — it sets the floor for almost every lending and deposit rate in India.
- Since October 2019, all new floating-rate retail loans from banks must be linked to an external benchmark (typically the repo rate via RLLR).
- A 25 bps repo cut on a ₹50 lakh, 20-year home loan reduces your EMI by roughly ₹800 per month — over the life of the loan, that is ₹1.9 lakh.
- FD rates move with a 1–3 month lag and rarely match repo movements one-for-one. Banks compress deposit rates faster than they pass on lending rate cuts.
- If you took a loan before October 2019, you may still be on MCLR or BPLR — switching to RLLR can save you 50–150 bps depending on your bank.
What the repo rate actually is
The repo (repurchase) rate is the rate at which the Reserve Bank of India lends overnight money to commercial banks against government securities. When RBI changes the repo rate, every short-term funding cost in the banking system shifts — and that flows through to your home loan, FD, credit card, and personal loan rates within weeks.
The Monetary Policy Committee (MPC) reviews the repo rate eight times a year. In 2026, the focus has been on balancing inflation control with growth — the rate has been held at 6.50% for several consecutive meetings, with markets pricing in cuts later in the year.
How a repo change reaches your loan
For loans sanctioned after 1 October 2019, banks must link new floating-rate retail loans (home, auto, MSME) to an external benchmark. Most banks chose the RBI repo rate. Your loan rate is then quoted as:
RLLR = Repo Rate + Spread + Risk Premium
So if the repo is 6.50%, your bank's spread is 2.55% (typical for top borrowers at SBI/HDFC/ICICI), your effective home loan rate sits at 9.05%. When the repo moves, your rate changes within the next quarterly reset — most RLLR-linked loans reset every 3 months.
Older loans (pre-October 2019)
If your loan was sanctioned before October 2019, you may still be on the MCLR (Marginal Cost of Funds based Lending Rate) or even the older RBI base rate / BPLR. These benchmarks move slower than RLLR and historically pass through rate cuts incompletely. Banks are required to offer MCLR borrowers a one-time switch to RLLR — usually for a small administrative fee.
Real numbers — how a 25 bps move affects you
₹50 lakh home loan, 20-year tenure
| Repo rate | Effective home loan rate | EMI | Total interest paid |
|---|---|---|---|
| 6.50% (current) | 9.05% | ₹45,300 | ₹58.7 lakh |
| 6.25% (after 25 bps cut) | 8.80% | ₹44,500 | ₹56.8 lakh |
| 6.00% (after 50 bps cut) | 8.55% | ₹43,700 | ₹54.9 lakh |
A 50 bps cut saves you roughly ₹3.8 lakh across the life of a ₹50L home loan — far bigger than most people realize. Use the EMI calculator to plug in your exact numbers.
₹10 lakh fixed deposit, 5-year tenure
FD rates do not move one-for-one with repo. A 25 bps repo cut typically translates to a 15–20 bps cut in 1-year FD rates and 10–15 bps in 5-year FD rates. Banks have stickier deposit pricing because they need to retain funding.
| Repo rate | SBI 5-yr FD rate (typical) | Maturity value of ₹10L |
|---|---|---|
| 6.50% | 6.75% | ₹13,98,000 |
| 6.25% | 6.65% | ₹13,86,000 |
| 6.00% | 6.55% | ₹13,73,000 |
So a 50 bps repo cut costs an FD investor about ₹25,000 on a ₹10 lakh 5-year deposit. Use the FD calculator to see what your bank's current rate translates to.
The asymmetry — why deposit rates fall faster than loan rates
When repo rises, banks pass on the increase to lending rates almost immediately to protect margins, but raise FD rates with a 1–3 month lag. When repo falls, banks cut FD rates first to compress their cost of funds, and pass on lending cuts more slowly. Over a full cycle, banks expand their net interest margin — that is the structural reality of Indian banking.
For you, this means: when rates rise, lock in a longer FD quickly; when rates fall, do not assume your home loan EMI drops automatically — call your bank and ask for the latest RLLR.
What to actually do depending on your position
If you have a floating-rate home loan
- Check your benchmark on your latest sanction letter or login to the bank portal. If it says BPLR or MCLR, request a switch to RLLR — savings can be 50 bps or more.
- Negotiate the spread above repo. Top borrowers (CIBIL 800+, government employees, salary account holders) get the lowest spreads. Many banks are open to a 10–25 bps reduction if you ask, especially if you threaten to refinance.
- Consider partial prepayment when rates rise. A ₹2 lakh prepayment on a ₹50L loan in year 5 reduces total interest by ₹4 lakh+.
If you are about to take a loan
- Compare RLLR + spread across at least 4 banks. Variation can be 50 bps for the same borrower profile.
- Avoid pre-EMI structures — they sound cheaper but extend your interest cost.
- Pick a 15-year tenure if you can afford the EMI. The 20-year option costs ₹4–5 lakh more in interest on a ₹50L loan.
If you have surplus to deposit
- In a falling-rate environment, lock 5-year FDs immediately to capture current rates.
- For 1-year horizons, prefer money market funds or arbitrage funds over savings accounts — taxation is more favorable for investors in 30% bracket.
- Senior citizens get an extra 0.5% on FDs and a ₹50,000 deduction on interest income under Section 80TTB.
If you have a personal loan or credit card debt
These rarely move with repo — personal loans are at 12–24%, credit cards at 36–42% APR. The right move is to clear them, not wait for rate cuts. A balance transfer can drop your rate by 200–500 bps if your CIBIL has improved.
Watching the next MPC meeting
RBI announces MPC decisions at 10:00 AM IST on the second day of each policy meeting. The schedule is published on the RBI website. Markets typically front-run the decision by 1–2 weeks based on inflation prints and global cues. Your home loan EMI updates within the next reset cycle (usually 3 months) — there is no need to call the bank on policy day.
Note: this article explains how rates work mechanically. Personal financial decisions depend on your specific circumstances. For your loan or deposit choices, consult a SEBI-registered advisor or your bank relationship manager.
Frequently Asked Questions
If RBI cuts the repo rate by 25 bps, when will my EMI fall?
For RLLR-linked loans (post October 2019), at the next quarterly reset — typically within 1–3 months. For MCLR loans, slower and partial. For older BPLR loans, slowest and least predictable.
How much does a 50 bps repo cut save on a ₹50 lakh home loan?
About ₹1,600 per month in EMI on a 20-year ₹50L loan, and roughly ₹3.8 lakh in total interest over the life of the loan. The exact number depends on your remaining tenure and bank's spread.
Should I switch from MCLR to RLLR?
Usually yes — RLLR transmits rate changes faster and more fully than MCLR. The administrative fee for switching is typically ₹1,000–5,000 plus GST and pays for itself within a few months if rates are falling.
Why do FD rates not rise as fast as loan rates?
Banks have an incentive to keep their cost of funds low, so they raise deposit rates only when forced to (by competition or liquidity needs). On the lending side, they pass through hikes immediately to protect net interest margin. This asymmetry is structural in Indian banking.
Are RBI Floating Rate Savings Bonds linked to the repo rate?
Indirectly. The RBI Floating Rate Savings Bond pays 35 bps over the prevailing NSC rate, and NSC rates are reset quarterly by the government based on G-Sec yields, which broadly track repo. So they move in the same direction but not exactly the same magnitude.
Home Loan EMI Calculator
Calculate your monthly EMI
- Instant EMI for any loan amount & tenure
- See total interest vs principal breakup
- Compare prepayment savings scenarios