Repo rate vs Loan EMI: In the February, April and June monetary policy committee (MPC) meetings this year, borrowers got huge relief from the Reserve Bank of India (RBI) as the central bank gave a cumulative rate cut of 100 bps. The significant rate cut translated into cheaper loans as equated monthly instalments (EMIs) of repo rate-linked loans also got slashed.
In contrast, in Wednesday's MPC meeting, RBI governor Sanjay Malhotra paused rate cuts, maintaining the repo rate of 5.5 per cent. He said that the ongoing tariff tensions with the US are the cause behind the pause.
It means there will be no change in EMIs of repo rate-linked loans. But there is still a high possibility of future rate cuts with 3 MPC meetings to go for this financial year. The next meeting is scheduled for September 29-October 1. The subsequent meetings will be held in December this year and February next year. If the RBI cuts the repo rate by up to 50 bps and those are reflected in bank loans, find out in this write-up how much you may save on your home, auto and personal loans.
Condition 1: If MPC cuts rates by 0.25%
Home loan EMI
We are taking the example of a 20-year home loan at a 7.5 per cent interest rate
Loan EMI before EMI after savings/year
20 lakh Rs 16,112 Rs 15,808 Rs 3,648
30 lakh Rs 24,168 Rs 23,711 Rs 5,484
50 lakh Rs 40,280 Rs 39,519 Rs 9,132
Auto loan EMI
We are taking the example of a 5-year auto loan at a 9 per cent interest rate
Loan EMI before EMI after savings/year
3 lakh Rs 6,228 Rs 6,191 Rs 444
5 lakh Rs 10,379 Rs 10,319 Rs 720
10 lakh Rs 20,758 Rs 20,637 Rs 1,452
Personal loan EMI
We are taking the example of a 1-year personal loan at a 10.10 per cent interest rate
1 year Personal Loan EMI @10.10%
Loan EMI before EMI after Savings/year
2 lakh Rs 17,592 Rs 17,569 Rs 276
3 lakh Rs 26,389 Rs 26,354 Rs 420
5 lakh Rs 43,981 Rs 43,923 Rs 696
Condition 2: If MPC cuts rates by 0.50%
Home loan EMI
We are taking the example of a 20-year home loan at a 7.5 per cent interest rate
Loan EMI before EMI after Savings/year
20 lakh Rs 16,112 Rs 15,506 Rs 7,272
30 lakh Rs 24,168 Rs 23,259 Rs 10,908
50 lakh Rs 40,280 Rs 38,765 Rs 18,180
Auto loan EMI
We are taking the example of a 5-year auto loan at a 9 per cent interest rate
Loan EMI before EMI after Savings/year
3 lakh Rs 6,228 Rs 6,155 Rs 876
5 lakh Rs 10,379 Rs 10,258 Rs 1,452
10 lakh Rs 20,758 Rs 20,517 Rs 2,892
Personal loan EMI
We are taking the example of a 1-year personal loan at a 10.10 per cent interest rate
Loan EMI before EMI after Savings/year
2 lakh Rs 17,592 Rs 17,546 Rs 552
3 lakh Rs 26,389 Rs 26,319 Rs 840
5 lakh Rs 43,981 Rs 43,865 Rs 1,392
(Disclaimer: These are estimates and actual loan rate cuts may vary after RBI reduces repo rate.)