RBI Holds Repo Rate Steady: What It Means For Home Loan Borrowers

The Reserve Bank of India (RBI) kept the repo rate unchanged on Wednesday after its three-day Monetary Policy Committee (MPC) meeting. After a series of rate reductions earlier this year, this pause signals stability for those repaying floating-rate loans.

Between February and June 2025, the RBI slashed the repo rate by a cumulative 100 basis points, from 6.5% to 5.5%, in an effort to stimulate borrowing and boost consumer demand. As a result, home loan interest rates dropped, with many major banks offering loans at rates as low as 7.3% per annum.

Leading lenders like the State Bank of India, Bank of Baroda, Canara Bank, ICICI Bank and HDFC Bank, among others, are currently offering home loans at interest rates between 7.3% and 8% for eligible borrowers. These reductions have made home ownership more accessible for many Indians.

As per RBI guidelines, since October 2019, banks have been required to link floating-rate retail loans, such as home loans, to external benchmarks, usually the repo rate. This ensures that any change in the central policy rate is reflected in the interest rates for existing borrowers.

With the repo rate remaining steady for now, borrowers with floating-rate home loans will not see any immediate change in their EMIs or loan tenures. When rates are reduced, banks usually maintain the same EMI and shorten the tenure. When rates rise, they must give borrowers a choice between a higher EMI, a longer tenure, or a blend of both.

The repo rate is the interest rate at which the RBI lends money to commercial banks in times of liquidity crunch. It is a monetary policy tool used to control inflation and manage economic growth.

A lower repo rate encourages borrowing, while a higher rate is aimed at cooling down inflation by making loans costlier. For home loan borrowers, especially those on floating rates, any change in the repo rate by the RBI plays a crucial role by affecting EMIs.

For prospective homeowners, the unchanged repo rate means that now remains a favourable time to secure a home loan before any potential hikes in the future. Fixed-rate borrowers, on the other hand, will not be impacted unless they opt to refinance under current terms.