With awareness and the right digital tools, you can reduce your EMI burden, avoid overpaying, and ensure that you do not miss out when rates fall.
New Delhi: When the Reserve Bank of India (RBI) announced a 25-basis point repo rate cut in February 2025 — the first reduction in nearly five years — millions of Indian borrowers welcomed the news. Lower repo rates usually mean reduced loan interest rates and lighter EMI burdens. However, for many existing borrowers, the impact was not immediate. Despite rate cuts, their monthly EMIs in March and April remained unchanged. Now, the central bank has announced a second rate cut.
According to Siddarth Jain, CFO at MinEmi, this is the little-known reality of India’s lending ecosystem — banks will not proactively pass on these benefits unless customers are aware and actively seek the reduction.
Why EMIs Do Not Automatically Fall
Consider the case of two home loan borrowers — Rahul and Shlok. Both took home loans worth Rs 2 crore. When RBI announced the repo rate cut, they calculated potential yearly savings of over Rs 1.2 lakh each. But in reality, only one of them will benefit from the reduced rate.
Rahul’s loan is linked to the Repo Linked Lending Rate (RLLR). RBI mandates that repo rate benefits be passed on to RLLR borrowers, but with a reset period of three months. Rahul will start seeing the lower EMI benefit from June 2025.
Shlok’s home loan, however, is linked to the older MCLR framework (pre-October 2019). For him, the rate reduction will not reflect unless he consciously approaches the bank and shifts to the RLLR structure — often by paying a nominal conversion fee.
“Banks are not obligated to inform borrowers proactively. Unless customers understand their rate, structure and take timely action, they may continue paying higher EMIs even when rates drop,” Jain said.
Industry Practices Affecting Borrowers
“While existing RLLR-linked loans eventually reflect rate cuts, banks have the flexibility to increase the spread (margin) on new loans. This allows them to maintain higher interest rates for new customers despite a lower repo rate,” he further said.
Most customers remain unaware of this practice. Many new borrowers may assume that lower repo rates automatically mean lower loan rates. However, they may end up paying the same or higher rates if banks choose to maintain or increase spreads.
Learning From the COVID Years
This situation mirrors what happened during the COVID period (2020–2021) when RBI reduced repo rates to historic lows to support the economy. Yet, many borrowers continued paying higher EMIs simply because they did not proactively request the rate reduction or check if they were eligible.
Even now, most borrowers do not check their loan agreements, reset periods, or take timely action — resulting in avoidable financial strain.
How Borrowers Can Save
A drop in the repo rate can mean big savings for borrowers, but only if they take the right steps. It starts with understanding your loan—whether it is linked to the repo rate or an older benchmark. Many borrowers continue paying higher EMIs simply because they are not aware of how their loan terms work.
“Next, it is important to review the loan’s spread. Banks adjust their margins over time, and what seemed like a good deal when you took the loan may not be the best option now. Talking to your bank and negotiating a lower rate can often lead to better terms, especially if you have a strong repayment history. If your bank isn’t willing to budge, consider a balance transfer to another lender offering more competitive rates,” he said.
Staying updated on RBI policies is equally important. When the central bank announces a rate cut, acting quickly can help you secure a lower EMI and maximize savings. By staying informed and proactive, borrowers can avoid overpaying and make the most of changing interest rates.
How Technology is Changing the Game
In the past, borrowers had to rely on manual follow-ups and endless calls to banks just to understand if they were eligible for lower interest rates. Today, technology is making this process much easier. Technology-led platforms now provide real-time rate alerts, personalized EMI simulations, and balance transfer assistance, ensuring borrowers do not miss out on potential savings. These platforms also offer transparent information and a unified EMI dashboard, allowing users to track and manage their loans seamlessly.
With these tools at their fingertips, borrowers no longer have to depend solely on banks for updates. Instead, they can stay informed, compare options, and make financial decisions that work best for them—all with just a few clicks.
“RBI’s rate cuts are an opportunity to lower your EMIs, but the responsibility to claim these benefits lies with borrowers. Banks rarely make the first move,” Jain said.
With awareness and the right digital tools, you can reduce your EMI burden, avoid overpaying, and ensure that you do not miss out when rates fall.
