RBI Maintains Interest Rates, Yet Experts Advise Home Loan Borrowers to Slash Their EMI Payments Significantly
In a recent development, the Reserve Bank of India (RBI) announced that it will maintain the repo rate at 5.5%, meaning that home loan EMIs for borrowers with floating-rate loans will remain stable for now [1][2]. This decision was made during the MPC meeting held from August 4 to 6, as announced by RBI Governor Sanjay Malhotra.
Since October 2019, banks have linked floating-rate home loans to an external benchmark, usually the repo rate. Any change in the repo rate directly affects the interest rates on these loans [2][4]. However, with the repo rate now held steady, the interest rates on floating loans are not expected to change immediately, so borrowers will see their EMIs and overall interest outgo remain unchanged [2][4].
While the repo rate remains unchanged, several lenders are offering lower rates, particularly on balance transfers, to high-credit borrowers. For instance, switching from a high-interest loan to a lower one, such as 7.75%, can save a borrower approximately Rs 3,151 per month and nearly Rs 7.56 lakh in interest over 20 years [3].
It is important to note that public sector banks are offering cheaper home loans than private banks, with Canara and Union Bank offering home loans at 7.30% [3]. On the other hand, private banks like Yes Bank are charging up to 9% for home loans [3]. A comparison of the interest rates offered by public and private sector banks for home loans is provided in the table below.
| Bank | Interest Rate | |----------------------------|-------------------| | Canara Bank | 7.30% | | Union Bank of India | 7.30% | | HDFC Bank | 7.35% | | ICICI Bank | 7.45% | | Yes Bank | 9.00% |
In conclusion, borrowers with floating-rate home loans will not experience any change in their EMI payments or loan terms following the RBI’s hold on the repo rate in August 2025 [2][4]. However, considering options like balance transfer can be beneficial for borrowers with costlier loans. This is the third MPC meeting of the current financial year 2025-26. The RBI's decision to keep the repo rate unchanged reflects its cautious stance amid improving inflation outlook but slower GDP growth and global uncertainties [1][3].
- Despite the RBI's decision to maintain the repo rate, some lenders are offering lower interest rates, particularly on balance transfers, advantageous for high-credit borrowers.
- The unchanged repo rate ensures stability for borrowers with floating-rate home loans, meaning their EMI payments and loan terms remain the same.
- In contrast to the lower interest rates being offered by public sector banks for home loans, private banks like Yes Bank are charging up to 9%.
- The table comparison shows that Canara Bank and Union Bank of India offer the cheapest home loans at 7.30%, while HDFC Bank offers a rate of 7.35% and ICICI Bank at 7.45%.
- Borrowers with costlier loans can consider options like balance transfer to save significantly, for instance, up to Rs 7.56 lakh over 20 years.
- This third MPC meeting of the financial year 2025-26 indicates the RBI's cautious stance amid improving inflation outlook but slower GDP growth and global uncertainties.
- In the realm of finance, the decision to maintain the repo rate has broader implications for personal-finance, business, and general-news.
- Additionally, understanding the impact of the repo rate on interest rates can be beneficial for areas such as lifestyle, education-and-self-development, food-and-drink, shopping, entertainment, and sports.
