Home loan EMIs may reduce despite no repo rate cut:Banks lower interest rates by a smaller margin than RBI’s policy rate

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) unanimously decided to keep the repo rate unchanged at 5.25% on Wednesday, 8 April, 2026. But, there is a good news for common man which is that banks are still expected to continue with the reduction of interest rates on various types of advances like home loan, auto loan, etc. Why banks are likely to continue to reduce loan RoI despite no change in repo rate? While delivering the MPC statement of April 2026, the RBI, governor, Sanjay Malhotra, said that since the time the central bank kickstarted the ongoing interest rate cut cycle in February 2025, the banks in India have reduced interest rates on fresh loans by 89 bps and that of active loans by 87 bps as of February 2026. 100 bps = 1% So, lenders have reduced the RoI on loans by up to 89 bps or by 0.89% only. There is still room for 25 bps more relief as during the same period the apex bank has slashed the repo rate by 1.25%. The transmission may not be over yet! There is more room for the lenders to pass on the benefit of interest rate cut to the end borrowers. Previously, in the June 2025 MPC meet, the RBI governor had said that banks in India take around 6-9 months to fully pass on the benefit of the repo rate cut. Banks take around 3 months to pass on benefits of repo rate cut: Kotak Mahindra Bank Banks take minimum of three months to transmit the repo rate cut on to the final interest rate on home loans. -Kotak Mahindra Bank Banks have so far transmitted only up to 89 bps reduction in interest rates, so, out of total repo rate cut of 1.25%, 0.36 bps cut is still to be transmitted to the loan interest rates. The mean RoI on housing loans displayed at the website of the public sector lender, Canara Bank, is currently 8.26%. Taking this RoI into consideration, let’s decode with the help of an example why any borrower’s EMIs would still reduce despite the MPC’s August 2025 setback of maintenance of status quo on the benchmark policy rate. How home loan RoI is determined? As of April 2026, home loan interest rates in India are primarily linked to the Repo Linked Lending Rate (RLLR) or the External Benchmark Lending Rate (EBLR). This means your final rate is determined by the RBI’s repo rate plus a spread or margin added by the bank based on your credit profile. Home Loan RoI Of Top 5 Banks