How Will the 6% Repo Rate Affect Your Home and Auto Loan EMIs after RBI Rate Cut?

SUMMARY

The RBI cut the repo rate by 25 basis points to 6.00%. This marks the second consecutive rate reduction by the central bank in as many meetings. This decision is anticipated to decrease EMIs for home and auto loans, providing some relief to borrowers.

The Reserve Bank of India lowered the repo rate by 25 basis points to 6.00% on Wednesday. This is the second consecutive rate reduction by the central bank, meeting market expectations and reducing borrowing costs to their lowest point since November 2022.

In February 2025, the RBI decreased its key repo rate by 25 basis points to 6.25% for the first time since May 2020.

Experts suggest that the RBI's recent decision is likely to benefit borrowers across India, including those with home loans, car loans, MSME loans, and other retail floating-rate borrowings, as banks are expected to lower interest rates.

Retail floating loans initiated after October 2019 are linked to an external benchmark, typically the repo rate, meaning loan EMIs adjust with changes in the repo rate. Domestic banks usually transfer these benefits to borrowers either partially or fully, based on their interest reset cycle, which generally occurs within a 3 to 6 month timeframe.

Here is the potential savings for home and auto loan borrowers if banks choose to pass on the full benefits of the 0.25% repo rate cut:

RBI repo rate cut: How much will you save on home loan EMIs?

Eligible homebuyers in India with floating interest rate home loans might experience a reduction in their interest rates by up to 25 basis points, following the RBI's announcement.

Here's how much you can save annually on home loans of ₹20 lakh, ₹30 lakh, and ₹50 lakh, assuming a 20-year tenure and an average median interest rate of 8.5% (prior to the repo rate cut).

Auto loan EMIs savings

The reduction in the repo rate is expected to benefit individuals with car or two-wheeler loans, as these are categorized under retail loans. Those with auto loans might experience a decrease in their interest rates by 25 basis points (0.25%), assuming the bank transfers the entire benefit to them.

Here's the potential savings for auto loan borrowers on loans of ₹5 lakh, ₹7 lakh, and ₹10 lakh, assuming a five-year tenure and an average median interest rate of 9.2% per annum (prior to the repo rate cut).