Top News

Repo rate: Repo-linked loans track the RBI's policy rate, whereas MCLR is a bank-specific benchmark influenced by the bank's cost of funds and reset cycles.

Repo rate impact on loan EMI: The Reserve Bank of India (RBI) announced its decision regarding the repo rate on August 5 following a three-day meeting of the Monetary Policy Committee (MPC). This time, the Reserve Bank kept the repo rate unchanged at 5.25%. The last 25-basis-point cut occurred in December 2025, and the rate has remained stable since then. But does a stable repo rate mean there will be no change to your home loan EMI in 2026? Let’s find out.

Your EMI could still go down!

It is not always the case that an unchanged repo rate means the EMI remains static; it depends on the benchmark linked to your loan. While new floating-rate home loans are typically linked to external benchmarks like the repo rate, some older loans may still be linked to the MCLR (Marginal Cost of Funds-based Lending Rate). Repo-linked loans are directly tied to the RBI's policy rate; when the repo rate changes, the lending rate may also adjust according to the loan's reset terms.

On the other hand, MCLR is an internal benchmark set by the bank. If your home loan is linked to the MCLR or Base Rate, the bank resets it every six months or annually. During this process, rates may fluctuate based on the bank's internal cost of funds.

To put it simply:

Banks do not immediately raise or lower interest rates the moment the Reserve Bank changes the repo rate. When you take an MCLR-based home loan, banks typically opt for a one-year tenure and include a one-year reset period in the agreement. Consequently, any hike or cut in the Reserve Bank's repo rate will not immediately impact your EMI. Your loan's interest rate will change only when the bank-determined reset date arrives—that is, exactly one year after the loan commences. On that reset date, the prevailing MCLR set by the bank will become the new rate, locked in for the subsequent year.