RBI keeps repo rate unchanged: Will your EMIs get cheaper now?

Were you expecting lower EMIs after the RBI's policy announcement? Here's what the decision to keep the repo rate unchanged means for your home loan.

In Short

• RBI keeps repo rate steady at 5.25%
• Home loan EMIs unlikely to reduce soon
• Borrowers advised to compare lenders now

If you were expecting your loan EMIs to come down after the Reserve Bank of India's latest policy announcement, you may have to wait a little longer. The RBI has kept the repo rate unchanged at 5.25%, meaning banks are unlikely to reduce lending rates immediately.

The six-member Monetary Policy Committee (MPC) unanimously decided to leave the key policy rate unchanged while retaining its "neutral" stance. RBI Governor Sanjay Malhotra said the central bank wants more clarity on inflation and global developments before making any changes to interest rates.

WHY DID THE RBI KEEP RATES UNCHANGED?

According to the RBI, while India's economy remains resilient, several risks continue to cloud the outlook. Rising crude oil prices, weather-related uncertainties and global developments could push inflation higher in the coming months.

With inflation still the central bank's primary concern, the RBI has decided to maintain the current repo rate instead of cutting it.

WILL YOUR HOME LOAN EMI COME DOWN?

For most home loan borrowers, the answer is not immediately.

Since the repo rate has remained unchanged, banks are unlikely to lower lending rates in the near term. This means borrowers with repo-linked floating-rate home loans should not expect an immediate reduction in their EMIs.

Adhil Shetty said borrowers should see the current rate environment as one of stability rather than expecting quick rate cuts.

"The RBI's decision to keep the repo rate unchanged at 5.25% means home loan borrowers are likely to see little immediate change in lending rates. Floating home loan rates currently range from about 7.0% to 9.4% at public sector banks and 7.3% to 9.3% at private banks, depending on the borrower's credit profile," he said.

WHAT SHOULD NEW BORROWERS DO?

According to Shetty, those planning to take a home loan need not postpone their decision in the hope of lower interest rates.

"With the MPC indicating that inflation remains the key policy focus, borrowers should view the current rate environment as one of stability. Those planning to take a home loan can compare lenders on spreads, processing charges and repayment flexibility rather than wait for a policy-led reduction in rates," he added.

Experts say comparing loan offers from different banks and looking beyond just the interest rate can help borrowers secure a better deal.

WHAT ABOUT EXISTING BORROWERS?

For people already repaying home loans, the latest policy is unlikely to change monthly outgo immediately.

Shetty said households should not expect any major relief in EMIs for now.

"For households, this means little immediate change. Existing borrowers are unlikely to see any change in EMIs in the near term, while deposit rates are likely to remain broadly stable. For now, inflation is likely to remain a more immediate consideration for household finances than expectations of lower borrowing costs," he said.

Simply put, the RBI's decision to keep the repo rate unchanged means loan borrowers are unlikely to see cheaper EMIs in the immediate future. Unless banks independently revise their lending rates, home loan EMIs are expected to remain broadly unchanged. For prospective borrowers, this may be a good time to compare lenders and negotiate better loan terms rather than waiting for an uncertain rate cut.

- Ends