How much will your EMI decrease after RBI slashes interest rate? If you have home loan of Rs 50 lakh, you will save...

As the Reserve Bank of India (RBI) has slashed the repo rate or the interest rate by 50 basis points and the Cash Reserve Ratio by 100 basis points, the commercial banks are most likely to reduce their interest rates and consequently the equated monthly installments or the EMI. Repo rate is the interest rate at which the RBI lends money to commercial banks, which in turn extend loans to individuals like you and me. As the central bank has reduced its interest rates, banks are likely to follow suit, reducing their rates and thus lowering your interest and EMI. Secondly, CRR is the ratio of money that the commercial banks have to put with the RBI about the cash they have. As the central bank has reduced the CRR by 100 basis points from 4% to 3%, banks have to put less money with the RBI, they will have more money to lend. With lower interest rates and more money at their disposal, commercial banks are expected to slash interest rates. 

Calculate your EMI

Let us try to understand it with an example. If you have taken a home loan of Rs 50 lakh for 20 years, your EMI may come down by Rs 3,164. If your interest rate is 8.5%, and your bank cuts the rate by 50 basis points, your total interest payable will come down from 54.14 lakh to Rs 46.67 lakh, thus you will be able to save Rs 7.47 lakh for the whole period. If you keep on paying the interest for the entire period will be able to repay the entire loan in 17 years instead of 20 years. Thus, you will repay the entire loan 3 years before the scheduled time. Similarly, for loans of Rs 1 crore and Rs 1.50 crore for the same period, the savings on the EMI would be Rs 6,329 and Rs 9,493 respectively. You may calculate other loan amounts accordingly.

Reduced Inflation Rate

Besides, the RBI has declared that the rate of inflation for April 2o25 has come down from 3.34% to 3.16%. According to the SBI Research Report, the inflation rate for the first quarter of FY 2026 may be 2.9%, because the food prices may come down. As the monsoon has arrived before the scheduled time and the IMD has predicted a better one, the CPI estimate for FY 2026 maybe 3.5%. Similarly, the GDP growth rate may be softened because of external reasons like the tariff war.