When the Reserve Bank of India (RBI) changes the repo rate, news reports say home loans will get cheaper or costlier. What actually happens to your EMI depends on what your loan is linked to, when it resets, and whether your lender changes your EMI or your tenure. This guide explains each step with numbers.
What is the repo rate, and what did RBI do in October 2026?
The repo rate is the rate at which RBI lends money to banks for short periods. When it goes up, borrowing tends to get costlier across the economy. When it goes down, the reverse.
On 7 October 2026, RBI's Monetary Policy Committee raised the repo rate by 25 basis points to 5.50%. A basis point is one-hundredth of a percentage point, so 25 basis points is 0.25 percentage points. RBI also changed its stance from "neutral" to "calibrated tightening". Before this, the repo rate had been 5.25% since a cut in December 2025, and RBI kept it unchanged at its April, June and August 2026 meetings.
How does a repo rate change reach my home loan?
It depends on your loan's benchmark. Your floating rate is the benchmark plus a spread (the lender's margin), which is fixed at sanction and changes only in limited cases.
- Repo-linked or EBLR loans (external benchmark lending rate). Since 1 October 2019, banks must link new floating-rate retail loans, such as home loans, to an external benchmark. Many use the repo rate. RBI rules require the rate to be reset at least once in three months. So a repo change usually reaches you at your next reset date.
- MCLR loans (marginal cost of funds based lending rate). MCLR is the bank's internal rate, based on its own cost of funds. It does not move one-for-one with repo. Your rate changes only on your reset date, which is set in your contract, with a reset periodicity of one year or less.
- Base rate loans. The older internal benchmark, used for floating loans sanctioned from July 2010 to March 2016. Your rate changes when the bank revises its base rate.
- NBFC and housing finance company loans. The external benchmark rule covers banks. Floating-rate loans from NBFCs (non-bank finance companies) and housing finance companies are often linked to the lender's own benchmark, which the lender revises.
What is a reset date?
The reset date is when your lender applies the current benchmark to your loan. If repo changes just after your reset, you may not see the change until the next one. Your sanction letter, loan agreement or lender's app usually shows the reset frequency. If not, ask the lender in writing.
Will my EMI go up, or my tenure?
Your EMI (equated monthly instalment) is the fixed amount you pay each month. Your tenure is the number of months left. When the rate changes, a lender can change the EMI, the tenure, or both. Take a loan of ₹40,00,000 with 20 years (240 months) left at 8.25%, and a 0.25-point rise to 8.50%. EMIs use the standard formula:
EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1), where P is the amount outstanding, r is the monthly rate (annual rate ÷ 12 ÷ 100) and n is the months left.
| Option | Rate | EMI | Months | Total interest |
|---|---|---|---|---|
| Before the change | 8.25% | ₹34,083 | 240 | ₹41,79,830 |
| Rate up, EMI goes up | 8.50% | ₹34,713 (+₹630) | 240 | ₹43,31,103 |
| Rate up, tenure goes up | 8.50% | ₹34,083 | 253 (+13) | About ₹45,93,513 |
| Rate down, EMI goes down | 8.00% | ₹33,458 (−₹625) | 240 | ₹40,29,825 |
| Rate down, tenure goes down | 8.00% | ₹34,083 | 230 (−10) | About ₹38,23,058 |
Two lessons follow. When rates rise, a longer tenure keeps the EMI the same but costs more in total interest: here, about ₹2.6 lakh more than raising the EMI. When rates fall, keeping the same EMI and shortening the tenure saves more interest than taking a lower EMI.
What are my rights when my floating rate resets?
RBI's 2023 rules on resetting floating rates cover EMI-based personal loans from banks, NBFCs and housing finance companies. RBI's FAQs on these rules point to its reporting definition of "personal loans", so ask your lender to confirm in writing that your home loan is covered. RBI has since folded many older circulars into consolidated directions (November 2025), so check the latest directions. In simple terms, the rules say:
- At sanction, the lender must explain how a benchmark change could affect your EMI and tenure.
- Any increase in your EMI or tenure must be communicated to you immediately.
- At reset, you can choose a higher EMI, a longer tenure, or a mix of both.
- You can prepay all or part of the loan at any time. Banks cannot charge prepayment penalties on floating-rate term loans to individuals, and for loans sanctioned or renewed from 1 January 2026, the same applies at all regulated lenders for non-business loans to individuals.
- Lenders may, at their option, offer a switch to a fixed rate under their board-approved policy. Since an October 2025 amendment, this is optional for the lender rather than mandatory.
- Extending the tenure must not lead to negative amortisation.
- Lenders must send a simple statement at the end of each quarter showing principal and interest recovered so far, the EMI, the number of EMIs left, and the annualised rate.
What is negative amortisation?
It is when your EMI no longer covers even the month's interest, so the amount you owe grows. In the example above, the first month's interest on ₹40,00,000 at 8.50% is about ₹28,333, well below the ₹34,083 EMI. But if the rate rose to about 10.22%, an EMI of ₹34,083 would only cover the interest. Before that point, the lender would have to raise the EMI rather than stretch the tenure further.
Why didn't my bank pass on a repo cut?
- Your loan is on MCLR or base rate. These internal rates do not move one-for-one with repo, and your rate changes only on your reset date.
- Your reset date has not come yet. Repo-linked loans reset at least once in three months, not on the day RBI announces a change.
- Your spread is high. A repo cut lowers the benchmark, but your spread stays. Spreads set years ago may be higher than what the bank offers today.
- Your lender changed the tenure, not the EMI. Your EMI looks the same, but you may finish sooner after a cut, or later after a rise. Check your quarterly statement for the number of EMIs left.
- Your loan is with an NBFC or housing finance company that revises its own benchmark on its own schedule.
What can I do now?
- Find your benchmark, spread and next reset date in your sanction letter, statement or app.
- Check your quarterly statement for EMIs left. If your tenure keeps growing, consider asking for a higher EMI instead.
- If you are on MCLR or base rate, ask about moving to the bank's repo-linked rate.
- Ask your lender to lower your spread to its current rate, or compare offers from other lenders.
Do it in 10 minutes, free
Use the rate change calculator on LowerMyEMI to see exactly how a rate change moves your EMI or tenure. If your spread looks high, enter your loan once and we draft a letter to your bank and one email per lender asking for their best rate. You send them from your own email, with day-3 reminder and day-7 escalation texts ready.