RBI Update: EMI of home loan will decrease, know how much you will save every month..

The Reserve Bank of India (RBI), while announcing the monetary policy on June 6, 2025, has announced a cut in the repo rate by 50 basis points i.e. 0.50 percent. This is the third consecutive time that the RBI has reduced the repo rate this year. This is the biggest cut this year. Now the repo rate has come down to 5.50%. Earlier, 25-25 basis points were cut in February and April as well. That is, in total, 100 basis points have been cut in the first half of 2025.

Along with this, CRR i.e. Cash Reserve Ratio has also been reduced by 1% to 3%. The effect of this will be that banks will now have more money available and they can further reduce interest rates on services like home loans.

How much relief will be available in EMI?

The cut in repo rate will have a direct impact on your home loan. If you have a home loan of Rs 50 lakh, with an interest rate of 8.5% and a tenure of 20 years, then the EMI can be reduced by about Rs 3,111. That is, your EMI which was earlier Rs 43,391, will now become Rs 40,280. That is, there will be a saving of about Rs 37,000 annually.

If you keep the EMI as before, then the tenure of the home loan can be reduced by 3 years. That is, your loan can end three years earlier. Not only this, there can be a saving of up to Rs 15.44 lakh in interest.

Understand the calculation: How cheap will the home loan be?
If your home loan is Rs 50 lakh and the tenure is 20 years, then:

Old EMI (at 8.5% interest): Rs 43,391

New EMI (at 7.5% interest): Rs 40,280

Monthly savings: Rs 3,111

Total interest savings: Rs 7.47 lakh

What should home loan borrowers do now?

If your home loan is linked to EBLR (External Benchmark Lending Rate), which is the repo rate in most banks, then your interest rate and EMI may come down in the coming months. Banks will give you the option to reduce EMI or reduce tenure. The benefits of this reduction will start coming soon.

At the same time, if your loan is still linked to MCLR or base rate, then experts suggest that you shift it to EBLR so that you can get the benefit of interest rate reduction quickly. According to experts, reducing the tenure is more beneficial than reducing the EMI, as it saves a lot of interest.

Why did RBI make this decision?

RBI Governor Sanjay Malhotra said that inflation has consistently remained below RBI's target of 4%. Retail inflation fell to 3.16% in April, which is the lowest level in 6 years. Also, it was necessary to support the domestic economy amid a good start to the monsoon and global uncertainties. Given this, a big cut has been made in the repo rate.

A cut in both repo rate and CRR will reduce liquidity pressure on banks and they will be able to make loans cheaper. Housing, automobile, banking, and infrastructure sectors will benefit from this. Along with this, it will be easier for rural and small businesses to take loans, which will boost economic activities.

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