Have RBI rate cuts actually reduced your home loan EMI?
If the answer is no, you could be paying more than you should—and missing out on significant long-term savings.
Between February and December 2025, the Reserve Bank of India (RBI) cut the repo rate by a cumulative 125 basis points. In theory, this should have lowered EMIs for borrowers with floating-rate home loans. In reality, many borrowers—especially those with older loans or NBFC loans—are yet to see meaningful benefits.
Why Many Borrowers Miss Out on Lower Interest Rates
Although RBI has mandated that floating-rate home loans be linked to external benchmarks like the repo rate, rate transmission is not always smooth or timely.
This is particularly true for NBFCs, where:
- Funding structures are more complex
- Rate adjustments are often delayed
- Benefits of repo rate cuts are passed on partially or slowly
As a result, borrowers may continue paying higher-than-market interest rates, even after multiple RBI cuts.
When Should You Review or Switch Your Home Loan?
You should actively review your home loan if:
- Your interest rate hasn’t reduced despite RBI rate cuts
- You are paying 0.50% or more above current market rates
- Your credit score or income profile has improved since loan sanction
Even a 0.50% reduction in interest can translate into savings of several lakhs over the remaining loan tenure.
Costs to Compare Before Switching Lenders
Before opting for a home loan balance transfer, always factor in:
- Processing fees
- Legal and technical valuation charges
- Documentation and administrative costs
Good news: There are no prepayment or foreclosure charges on floating-rate home loans, making switching more borrower-friendly.
Balance Transfer vs Rate Conversion: Which Is Better?
Not every borrower needs to switch lenders.
Rate Conversion (Same Lender)
- Pay a small conversion fee
- Faster process
- Minimal paperwork
Balance Transfer (New Lender)
- Potentially lower interest rates
- More paperwork and formalities
- Better suited if the rate gap is significant
A careful comparison helps determine which option offers maximum net savings.
Credit Score Still Matters—Even After RBI Rate Cuts
Your credit score remains a key determinant of the interest rate you receive.
Banks typically offer their best rates to:
- Borrowers with strong credit scores
- Salaried individuals with stable income
- Customers with a clean repayment track record
A higher credit score signals lower risk, enabling lenders to price loans more competitively—sometimes even below standard market rates.
