Home Loan EMIs May Fall Despite RBI Holding Repo Rate

Home loan EMIs may reduce as banks continue rate transmission despite Reserve Bank of India keeping repo rate unchanged at 5.25%

Repo Rate Status Quo

In a key monetary policy decision, the Reserve Bank of India (RBI) has kept the repo rate unchanged at 5.25% during its April 2026 Monetary Policy Committee (MPC) meeting. While the move signals caution amid evolving economic conditions, borrowers may still see relief as home loan EMIs could decline in the coming months.

The decision was taken unanimously by the MPC on April 8, indicating a pause in the rate cut cycle that began in early 2025.

Relief For Borrowers

Despite no fresh rate cut, banks are expected to continue lowering lending rates on loans, including home loans and auto loans. This could directly benefit borrowers through reduced EMIs.

The easing of loan rates is linked to the lag in transmission of earlier repo rate cuts, which banks typically pass on over time rather than immediately.

Transmission Gap Remains

According to RBI data, banks have reduced lending rates by about 89 basis points (bps) on fresh loans and 87 bps on existing loans since February 2025. However, during the same period, the repo rate was cut by 1.25%.

This indicates that nearly 36 bps of rate cuts are yet to be passed on to borrowers, leaving room for further reduction in EMIs.

RBI Governor Sanjay Malhotra noted that the transmission of policy rate changes into lending rates is still underway.

How Banks Adjust Rates

Banks link home loan interest rates to external benchmarks such as the Repo Linked Lending Rate (RLLR) or External Benchmark Lending Rate (EBLR). These benchmarks ensure that changes in the repo rate eventually reflect in borrower interest rates.

However, the adjustment is not immediate. Banks revise rates periodically based on internal factors such as liquidity, cost of funds, and borrower profiles.

Time Lag Explained

Industry estimates suggest that banks take around three to nine months to fully transmit repo rate changes. In some cases, initial transmission may begin within three months but complete adjustment takes longer.

For borrowers, this means that even if the repo rate remains unchanged, earlier rate cuts can still reduce EMIs gradually over time.

Current Loan Rates

Public and private sector banks currently offer home loans in a broad range depending on credit profiles.

For instance, leading lenders such as State Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, and Axis Bank offer home loan rates ranging roughly between 7.2% and 10.05% per annum.

The average housing loan rate at some public sector banks remains around 8.26%, suggesting scope for further softening.

Impact On Consumers

Lower EMIs could provide relief to millions of borrowers, especially in a high-cost environment where household budgets remain under pressure. Reduced borrowing costs may also support demand in the housing sector.

Experts believe that even a marginal drop in interest rates can significantly lower long-term repayment burdens for homebuyers.

What Lies Ahead

While the RBI has paused rate cuts for now, the transmission of previous reductions is expected to continue in the near term. Borrowers may benefit as banks gradually align lending rates with past policy changes.

Going forward, future MPC decisions, inflation trends, and global economic conditions will play a crucial role in determining the direction of interest rates.

For now, home loan EMIs may reduce even without a fresh repo rate cut, offering a positive India News Update for borrowers tracking Government Updates and financial trends under Latest News Today.