Home Loans & Finance
What is the Repo Rate?
The number the RBI sets, and the number your EMI is built on — with the bank's margin bolted on top. Understanding the join is what lets you argue about it.
The short answer
The repo rate is what the RBI charges banks to borrow short-term.
Since October 2019, banks must link new floating-rate retail loans to an external benchmark — and almost all of them use the repo rate.
So: your rate = repo rate + your bank's spread. When the RBI cuts, your EMI should fall within three months. If it hasn't, something is wrong — and it is worth finding out what.
What the repo rate is
When a bank needs short-term money, it borrows from the RBI, pledging government securities. The repo rate is what the RBI charges for that.
It is the RBI's principal tool for managing inflation and liquidity, set by the Monetary Policy Committee, which meets every couple of months.
Cut it, and money gets cheaper across the economy. Raise it, and borrowing gets dearer.
How it reaches your EMI
The formula that governs your loan
Your rate = Repo rate + Your bank's spread
- The repo rate
- Set by the RBI. Published. The same for everyone.
- The spread
- Set by your bank, based on your CIBIL score, your income, your LTV, your employer.
The repo rate is the repo rate. Nobody negotiates with the RBI.
The spread is where your credit score turns into money. A borrower with a 780 CIBIL and a stable salary gets a materially thinner spread than one with a 690.
And the spread is fixed at sanction — for you, for the life of the loan. The bank can change it for new borrowers, but not for you.
Which means: negotiate it before you sign. Afterwards, you cannot.
If the RBI cut rates and your EMI didn't move
This is the single most useful thing on this page.
| Reason | What to do |
|---|---|
| You're on EBLR, and the reset hasn't come yet | EBLR loans reset at least every 3 months. Wait for the next reset date — it's in your sanction letter. |
| The bank reduced your TENURE, not your EMI | Many lenders default to this. It saves you more interest overall — but if you wanted a lower monthly outgo, ask them to reduce the EMI instead. You can choose. |
| You're on MCLR, not EBLR | The likeliest reason if you borrowed before October 2019. MCLR resets annually and often passes on only part of a cut. Switch to EBLR. |
| You're on a fixed rate | Then nothing will move, and that was the deal. |
| You borrowed from an HFC/NBFC, not a bank | See below. The EBLR mandate may not bind them. |
If your EMI has not moved after a meaningful RBI cut, phone your lender and ask which benchmark you are on, when your next reset is, and whether the cut has been passed on in full. You are entitled to a clear answer.
The gap nobody mentions: HFCs and NBFCs
The RBI's requirement to link floating-rate retail loans to an external benchmark applies to banks.
Housing finance companies and NBFCs are not bound by it in the same way. Their floating rates may be linked to an internal benchmark — a PLR, or their own reference rate — which they control, and which you cannot audit.
Which means: a rate cut may reach a bank borrower and not reach you.
If your loan is from an HFC, ask exactly what your rate is linked to, and how often it resets. If the answer is vague, that itself is the answer — and a balance transfer to a bank on an EBLR-linked loan may be worth running the numbers on.
How to check your position, today
- Look up the current repo rate — on the RBI's own website. Not a content site. The RBI's.
- Find your loan's benchmark — it's in your sanction letter, or ask the bank. EBLR? MCLR? Base rate? Fixed?
- Find your spread. Your rate minus the benchmark.
- Find your reset date.
- Compare with what new borrowers are being offered by three or four lenders.
- If the gap is more than about 0.5% and you have 5+ years left — a balance transfer is probably worth the arithmetic.
Home loan rates and the RBI's repo rate move. A page that says 'the rate is X%' is wrong within months, and quietly misleads everyone who reads it afterwards.
So we explain how the mechanism works — which does not change — and leave the number to you.
For the current repo rate, check the RBI's own website. For current home loan rates, check three or four lenders directly. Both take five minutes, and both are more reliable than anything a content site tells you.
Frequently asked questions
What is the repo rate?
The rate at which the RBI lends short-term funds to commercial banks against government securities. It is the RBI's principal tool for managing inflation and liquidity, set by the Monetary Policy Committee.
How does the repo rate affect my home loan EMI?
Since October 2019, banks must link new floating-rate retail loans to an external benchmark, and almost all use the repo rate. Your rate is the repo rate plus your bank's spread. When the RBI cuts, an EBLR-linked loan should reflect it within three months.
Why didn't my EMI fall after the RBI cut rates?
Several possible reasons. Your reset date may not have arrived (EBLR resets at least quarterly). The bank may have reduced your TENURE rather than your EMI — many default to this, and you can ask them to reduce the EMI instead. You may be on MCLR rather than EBLR, which is likely if you borrowed before October 2019. Or you may have borrowed from an HFC, which the EBLR mandate may not bind.
Can I negotiate my home loan spread?
Before you sign, yes — and that is the only part you can negotiate, since the repo rate is set by the RBI. The spread is fixed at sanction for the life of your loan; the bank can change it for new borrowers but not for you. So negotiate it before you sign, because afterwards you cannot.
Do housing finance companies follow the repo rate?
Not necessarily. The RBI's external benchmark mandate applies to BANKS. HFCs and NBFCs may link floating rates to an internal benchmark they control and you cannot audit — which means a rate cut may reach a bank borrower and not reach you. Ask exactly what your rate is linked to. If the answer is vague, that is itself the answer.