RBI Rate Cut : How much will your home loan EMI decrease, how much will be the benefit; understand the complete calculation

RBI Repo Rate Cut RBI has cut the repo rate after five years. In the MPC meeting of February, the repo rate has been cut by 25 basis points. This will greatly benefit those taking new loans. If someone has taken a loan on a floating rate, then his EMI or loan tenure will also be reduced. Let us know how much benefit will be derived from the rate cut.

Finance Minister Nirmala Sitharaman gave many gifts to the public in the budget. Now RBI Governor Sanjay Malhotra has also given a big good news. The central bank has announced a cut of 0.25 percent (25 basis points) in the repo rate in the MPC meeting of February. RBI Finance Minister has cut the policy interest rates after five years. This will make it cheaper to take home and car loans. Your current EMI can also be reduced.

What is Repo Rate?

The repo rate is the interest rate at which banks get loans from RBI. This means that by reducing the repo rate, it will become easier for banks to take loans. With this, they can also give loans to their customers at a lower interest rate. New customers taking loans benefit from this. Their EMI or loan period is reduced. At the same time, if someone has taken a loan on a fixed or floating interest rate, then his EMI will also be reduced.

How to get relief in EMI?

After the repo rate cut, customers who take home loans on floating interest rates have two options. They can either reduce their EMI or reduce the loan tenure. If you reduce the EMI, it will ease the burden on the monthly budget. You will have some extra money saved every month. On the other hand, reducing the tenure will end the loan quickly. This will end the loan quickly and there will be savings on interest. This is a good option for those who want to finish their loan quickly.

How much will be the benefit from the reduction in interest rate?

It depends on how much loan you have taken and for how long. Now suppose you have taken a loan of Rs 30 lakh for 20 years at an interest rate of 8.75 percent. Your EMI on this will be Rs 26,511 and you will have to pay a total of Rs 33,62,717.

But, if your bank gives 0.25 percent less interest rate after the RBI rate cut, then your interest will become 8.5 percent. Then you will have to pay EMI of Rs 26,035 only. This means you will get a direct benefit of Rs 476 every month. You will have to deposit only Rs 32,48,327 in total. This will give you a direct benefit of Rs 1,14,390.

How will you know about reduction in EMI or tenure?

As per RBI’s instructions, banks reduce the tenure after the repo rate is reduced. This means that the tenure of the loan will reduce as per the reduction in interest rate. Many banks ask while giving loan on floating rate whether you would like to increase or decrease the tenure or EMI after the change in interest rates.

After the RBI rate, if you want to reduce either the tenure or EMI according to your convenience and you had not chosen it while taking the loan, then you can contact the lending bank or NBFC. You can request them to reduce the EMI instead of the tenure or similarly reduce the tenure instead of EMI.

How to find out the benefits of the reduction in repo rate?

After the reduction in repo rate, banks usually transfer its benefits to the customers within a few days. They give this information by issuing a notification. You can check this change in your loan statement through net banking and the bank’s app. It is visible there how much change is happening in your EMI and tenure.

However, there is no rule as to how many days after the reduction in repo rate, the banks give its benefits. Banks are also not obliged to transfer the benefits of repo rate cut to the customers. If your bank is not giving you the benefit of repo rate cut, then you can also transfer the loan to another bank after waiting for some time.

Home loan interest rates of major banks

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