RBI repo rate cut: The Reserve Bank of India (RBI) unexpectedly announced on Friday that the 50 BPS repo rate would be lowered to 5.50 percent. After the three-day RBI MPC meeting, RBI Governor Sanjay Malhotra announced a higher-than-expected repo rate decrease. This will affect bank fixed deposit (FD) account holders and new house loan borrowers, according to tax and financial experts.
What do Experts Have to say?
The experts stated that if banks pass this relief on to their clients, the RBI's decision to lower the repo rate is anticipated to provide assistance for new home loan borrowers by lowering their monthly EMI. They stated that if a borrower has taken out ₹50 lakh for 20 years, the monthly house loan EMI calculator may display about ₹2,000 less. According to analysts, bank FD investors may see a decrease in returns following the RBI's repo rate shift across tenors.
Cut RBI Repo Rate Impact on Home Loan
"Although the RBI's 50 bps repo rate cut has been bold and visually striking in terms of allowing savings for its lenders, the repo rate N/O is at 5.5%, so home loan borrowers can save from the increase," explained Annuj Goel, Managing Director at Goel Ganga Developments, in reference to how this RBI repo rate cut would affect one's monthly home loan EMI, while talking to Mint.
This is how the deal works: if you had a loan of ₹50 lakh for 20 years, you could save slightly under ₹4.7 lakh over the loan's life, or somewhere about ₹1,960 off the monthly EMI.
"Home loan borrowers with a ₹30 lakh loan of 20 years will see decrease in their EMIs of about ₹1,176 per month, and the best part is borrowers then have the choice they can either reduce their EMIs or as being discussed here, retain their current EMI repayments to reduce the length of tenure and hence earn a greater interest saving," explained Aman Gupta, Director of RPS Group, in response to a question about how much relief a borrower would receive if they had taken out a home loan of ₹30 lakh for 20 years to Mint.
New House Loan with New Interest Rate
"The RBI has cut the repo rate by 25 bps in February and April also," stated Pankaj Mathpal, MD & CEO of Optima Money Managers, regarding the total benefit that a new house loan borrower would receive following the RBI's repo rate cut in 2025. Since the RBI has reduced the repo rate by 100 basis points (25 + 25 + 50) in 2025, those who have put off purchasing a home in recent quarters now have a fantastic chance to do so because they will receive a monthly EMI reduction of approximately ₹3,800 to ₹4,000 on a home loan of ₹50 lakh for 20 years.
Negative Impact on FD Returns
Pankaj Mathpal of Optima Money Managers commented on the potential negative effects of this repo rate drop on bank FD rates, saying that banks would lower FD rates across all tenors after informing their clients of the decision, while talking to a media outlet, Mint. Therefore, it is recommended that elderly citizens and other bank FD investors open an account right now because previous bank FD accounts are unaffected by changes in bank FD rates. They can look at small savings plans and time deposits at the post office if they don't take advantage of this chance.
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