3 weeks ago
Repo Rate Stays at 5.25%; Home Loan EMIs May Vary
The Reserve Bank of India is a big central bank that helps decide interest rates for the country.
In August, it decided to keep an important number called the repo rate at 5.25%.
This number helps banks figure out what to charge for loans.
You might think that means home loan payments will stay the same.
But the article explains that is not always true.
Some loans are tied to the bank's own numbers, called MCLR, which banks can change on their own.
Banks can also change the extra amount, called the margin, that they add on top of the rate.
So a family's home loan payment can go up or down a little even when the repo rate does not move.
It matters what kind of loan you have and how often the bank updates its rates.
The Reserve Bank of India kept the repo rate unchanged at 5.25% on 5 August, with the last cut of 25 basis points made in December 2025.
A stable repo rate does not guarantee frozen home loan EMIs in 2026; benchmark, reset cycle, spread and loan terms all matter.
Borrowers on repo-linked loans can still see EMIs rise if a bank revises its margin or spread, e.g., a 25 basis point margin increase on a ₹50 lakh loan could add about ₹804 per month.
MCLR-linked loans can change because banks set this internal benchmark, which is revised with a delay of one to four quarters; a 10 basis point MCLR cut could lower EMI by roughly ₹300 a month.
Historical data shows MCLR transmission of about 70% during the May 2022-November 2024 rate-hike cycle, but only around 16% during the February 2025-December 2025 rate-cut cycle.
- Who
- The Reserve Bank of India (RBI) and home-loan borrowers with floating-rate loans linked to the repo rate or MCLR.
- What
- The RBI kept the repo rate unchanged at 5.25%, but home loan EMIs can still change in 2026 depending on the loan benchmark, bank margins and reset cycles.
- Where
- India.
- When
- On 5 August, with the last rate cut of 25 basis points occurring in December 2025.
- Why
- EMIs can change because banks revise internal MCLR benchmarks, margins or spreads, and loans undergo periodic resets even when the RBI keeps the policy rate steady.
Key facts
- Repo rate
- 5.25% (unchanged on 5 August)
- Last rate cut
- December 2025, 25 basis points, to 5.25%
- Loan benchmarks
- Repo-linked and MCLR-linked
- MCLR reset cycle
- Usually every 6 to 12 months
- MCLR revision delay
- One to four quarters
- Transmission in hike cycle (May 2022-Nov 2024)
- ~70% (repo +250 bps; MCLR +~175 bps)
- Transmission in cut cycle (Feb 2025-Dec 2025)
- ~16% (repo -125 bps; MCLR -~20 bps by April 2026)
- Example EMI impact
- ₹50 lakh, 20-year loan at 7.75%: EMI ≈₹41,018; a 25 bps margin rise to 8% raises EMI to ≈₹41,822 (+₹804/month)
Quotes
Vijay Raundal
Director, Teerth Realties
“"MCLR is a bank's own internal benchmark. It's built from the bank's cost of funds, and then the bank revises it as it deems fit, usually with a delay somewhere between one and four quarters," he explained.”
livemint.com
“"Their bank reset cycle, usually every 6 to 12 months, can nudge EMIs around even if the RBI is doing nothing." "So the RBI pause doesn’t really shield you," he noted.”
livemint.com
Sources
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