How RBI's 50-bps repo rate cut will impact home loan EMIs and FD returns

The Reserve Bank of India (RBI) has cut the repo rate by 50 basis points, bringing it down to 5.5% from 6% earlier. This marks a cumulative reduction of 100 bps since February 2025. The move is expected to make loans cheaper and could trigger a downward shift in fixed deposit (FD) rates. For home loan borrowers, especially those on repo-linked loans, this is welcome news. But for depositors, the rate cut could signal the start of lower returns on fresh and upcoming fixed deposits (FDs).

Adhil Shetty, CEO of BankBazaar.com, says, "Today’s 50 bps rate cut is likely to push home loan rates closer to the psychologically important sub-8% level. The repo rate now stands at 5.50%, having been reduced by a cumulative 100 basis points since February 2025. The lowest rates in the market are already at 7.85%, largely available to prime borrowers with credit scores above 750, and often in refinance or balance transfer cases. A further rate cut could see sub-8% rates becoming more widespread—something we haven’t seen since early 2022."

However, the transmission of rate cuts remains uneven. Borrowers with repo-linked home loans will see the fastest and fullest pass-through. However, loans availed of before 2019, especially with public sector banks, continue to be linked to older benchmarks like the MCLR or even the Base Rate. These borrowers will not benefit automatically from today’s rate cut.

"If you’re paying 50 bps or more above the lowest available rates, and especially if you're in the early years of your tenure, it’s worth exploring a refinance to a repo-linked loan. This can help bring down your interest cost significantly over the life of the loan," says Shetty.

"For depositors, a 50-bp repo rate cut may not slash FD rates overnight, but it does signal the beginning of a downward trend. Banks are likely to start trimming deposit rates, especially for short- and medium-term tenures. If you’ve been waiting to lock in current rates, some of which still hover around 7.5%, now may be the time. Senior citizens, who enjoy an extra 25 to 50 basis points, should consider locking in longer tenures," says Shetty.

Chintan Panchmatya, Founder, Switch My Loan, said, "We foresee a potential surge in demand for big-ticket purchases—cars, personal gadgets, and homes—driven by lower EMIs. The Consumer Durable, Auto, Personal Loan, and Home Loan categories are poised for strong growth this quarter. We also anticipate increased activity in loan balance transfers as borrowers seek to capitalize on lower interest rates."