Why Your Home Loan EMI Has Not Fallen Even After RBI’s Rate Cuts

Every time the Reserve Bank of India (RBI) announces a repo rate cut, home loan borrowers expect immediate relief in their monthly instalments. When that does not happen, frustration builds and many start believing that banks have not passed on the benefit. 

This is why the phrase Home loan EMI not reduced is being searched and discussed more than ever. However, the problem is not denial of benefit but the way home loans are structured and how interest rate transmission works.

According to the RBI’s December 2024 Bulletin on Sectoral Deployment of Bank Credit, about 60.4 percent of floating-rate home loans are linked to the repo rate, while 35.6 percent are still linked to MCLR and nearly 2 percent remain on the old Base Rate system. This structure alone explains why the impact of a repo rate cut is uneven and why many borrowers do not see instant changes in their EMIs.

The Real Reason Your EMI Is Not Falling Immediately

In 2025, the RBI cut the repo rate three times, totalling 100 basis points, bringing it down to 5.5 percent, as reported by Mint. Later, in the December policy meeting, the RBI further reduced the repo rate by 25 basis points to 5.25 percent). Yet, a large number of borrowers still complain that their Home loan EMI not reduced.

The reason lies in the reset cycle. Even loans linked to the repo rate do not change interest rates on the day the RBI announces a cut. They reset only on predefined dates, usually once every three or six months, as explained by Moneycontrol. Until that reset date arrives, borrowers continue paying the old EMI.

Old Loan Benchmarks Are Still Slowing Down Transmission

For borrowers whose loans are still linked to MCLR or Base Rate, the transmission is even slower. Mint has reported that MCLR-linked loans can take six to twelve months to reflect any rate change because these benchmarks depend on banks’ internal cost of funds rather than the repo rate directly.
 

This is why two borrowers with similar loan sizes can see completely different outcomes after the same RBI decision.

The Hidden Role Of Spreads And Why Savings Look Smaller

Another critical factor is the spread, which is the margin banks charge over the benchmark rate. Mint has pointed out that banks typically keep a spread of around 2.5 to 3 percent over the repo rate.. If this spread has been increased over time, the benefit of a repo cut gets diluted.

The actual financial impact of rate cuts, however, is significant. A Financial Express calculation shows that on a ₹55 lakh home loan for 20 years, the EMI at 9.25 percent comes to about ₹50,372, while at 7.35 percent it drops to around ₹43,084, resulting in a saving of over ₹6,500 per month and a total interest saving of about ₹15.76 lakh over the tenure.

What Borrowers Could Actually Be Saving Today?

Times of India reported that a rate cut can reduce the EMI on a ₹1 crore home loan by around ₹3,500 per month.

LoansJagat has also explained that after the latest cut, a borrower with a ₹50 lakh home loan could save about ₹775 per month, depending on the reset date and spread applied by the bank.
 

What RBI And Banks Are Saying About The Delay?

RBI officials have repeatedly said in post-policy briefings that transmission is faster in externally benchmarked loans but legacy loans continue to slow the overall impact. 

Bank executives quoted by Mint and Financial Express have also advised borrowers to review their loan structure and consider switching to repo-linked loans, though conversion fees and revised spreads must be evaluated carefully.

Conclusion 

A repo rate cut is a signal, not a promise of instant relief. If the Home loan EMI not reduced, it is not because the system failed but because the loan structure works on its own timeline. Borrowers who understand this mechanism and track their reset cycles are far more likely to benefit from falling interest rates than those who wait passively.