Good Days For Home Loan Borrowers: EMIs To Drop Further After RBI Cuts Repo Rate

RBI lowered the repo rate to 5.25 percent on 5 December 2025 as stated in the Monetary Policy Committee report released that day. The October 2025 inflation figure of 0.25 percent set the ground for this step.

RBI lowered the repo rate by 25 basis points on 5 December 2025. The central bank’s policy review placed the total cuts for 2025 at 125 basis points. Banks said during post-policy calls that home loan EMIs after RBI repo rate cut could fall due to early moves in external benchmark linked loans. Several lenders prepared fresh sheets for their December reset.

A Ministry of Finance status paper for the third quarter of FY26 said liquidity improved across public lenders. This detail shapes the pace of interest transmission.

Here is a short set of indicators that formed the base of the December 2025 policy.

Key Indicators After The December Policy

These indicators explain the present tone of the credit market. They also guide how banks shape lending rates in each quarter.

Read More – How RBI’s 2025 Credit Rules May Cut Your Home Loan Rate Sooner

These values show how policy goals shifted after the inflation report. 

How Loan Structures Decide The Speed Of EMI Reduction?

A benchmark in lending is the main rate used by banks to price any loan. For home loans, the benchmark may be the repo rate or the MCLR rate. Repo-linked loans adjust quickly. MCLR loans adjust on reset days. Base rate loans move at a slower pace. Borrowers thus notice different timelines in EMI changes.

An article by Loansjagat dated 17 November 2025 noted that soft inflation often sets early signals for cheaper repo-linked loans. This matched the climate that shaped the 5 December 2025 policy cut. It helps to see actual examples that earlier reports carried. The next table includes known figures used in the June 2025 EMI stories.
 

*EMI drops follow the June 2025 home-loan trend examples.

These examples used a 50 basis point cut. They reflect the direction in which EMIs move when policy softens.

These examples show how earlier cuts shaped payments for borrowers. The present 25 basis point cut may produce a smaller shift but the pattern stays the same once banks publish new benchmarks.

Repo Rate Changes Over the Last Two Years (Up to the 5.25% Policy Level)

The RBI has made several small and steady changes to the repo rate in the past two years. These moves influenced how quickly loan EMIs changed for borrowers, especially for repo-linked loans.
 

These rate changes show how policy decisions slowly guide loan costs. Even small cuts can reduce EMIs once banks update their benchmark rates.

A story published on 6 June 2025 explained how a 50 basis point cut reshaped EMI levels and raised home registrations in large cities. That story showed how policy flow shaped loan activity. The present update fits the same cycle. It also aligns with demand signals recorded in the Ministry of Finance credit update for FY26.

To show how even a small rate change affects a borrower, an example compares two home loans of ₹50 lakh for 20 years. In the first case, the loan carries an interest rate of 7.50%, and the total interest payable comes to ₹46,67,118. 

In the second case, the rate drops slightly to 7.25%, reducing the interest payable to ₹44,84,512. This means the borrower saves about ₹1.83 lakh over the full tenure simply because of a 25-basis-point difference in rates.

How Governments And Banks Responded In Older Rate Cut Cycles?

Government notices during FY21 and FY22 recorded that PSU banks took longer to pass loan relief due to liquidity strain during that period. A Ministry of Finance circular in July 2023 asked banks to disclose transmission data for retail lending.

Also Read –  RBI Repo Rate Cut Brings Relief for Home Loan Borrowers

By FY26, banks built more substantial liquidity buffers, noted in the latest status paper. This prepares them for faster transmission today.

RBI Governor Sanjay Malhotra said in his 5 December 2025 press briefing that growth projections for FY26 remain firm. He said the stance stays neutral as the bank weighs future readings of inflation and demand.

Conclusion

Home loan EMIs after the RBI repo rate cut are expected to ease once banks publish their December reset rates. 

The 25 basis point cut, the October 2025 inflation level of 0.25 per cent and stronger liquidity all point toward lower repayment stress. Borrowers with repo-linked loans will see the impact first. Others will notice the drop on their reset dates.