RBI Cuts Repo Rate To 5.25 Percent, Home And Auto Loan EMIs Likely To Fall
RBI
After RBI reduced the repo rate by 25 basis points, borrowers with floating-rate home and auto loans may see lower EMIs once banks reset interest rates.
Mumbai, December 06, 2025 – The Reserve Bank of India has reduced the policy repo rate by 25 basis points to 5.25 percent, giving borrowers a reason to expect some relief on monthly loan payments. The decision follows earlier reductions this year and is aimed at stimulating borrowing and easing financial pressure on households.
The most direct benefit will be seen by customers who have floating-rate loans linked to external benchmarks such as the repo-linked lending rate. Most home loans today fall under this category, which means banks and housing finance companies are expected to pass on the reduction during the next rate-reset cycle. Once that happens, monthly instalments for home and auto loans may come down.
How much the EMI will fall depends on the size of the outstanding loan and the time remaining in the tenure. A borrower with a ₹50 lakh home loan could save around ₹1,000 to ₹1,300 per month after a 0.25 percent rate cut. While that might not feel dramatic immediately, the cumulative saving over years becomes meaningful. The yearly reduction alone could cross ₹12,000, and long-term savings toward the end of the tenure add up further.
However, the drop is not instant for everyone. Lenders revise interest rates on preset schedules, often once every three or six months. Until that reset happens, the EMI remains unchanged. Those on fixed-rate loans will see no change unless they switch to floating rates or renegotiate their loan structure. Borrowers planning to close loans early or make partial prepayments may also want to discuss revised interest terms with their lenders once the new rate structure reflects in their accounts.
Apart from direct borrower benefits, the rate cut is expected to support home-buying decisions and could boost real estate activity in markets like Mumbai, Pune, Bengaluru and Hyderabad. Lower monthly instalments often encourage fence-sitters to finalise purchases. Developers too hope that easier borrowing will increase demand in the coming months.
Auto loans may also become slightly cheaper, helping the vehicle market at a time when consumers are careful with big-ticket spending. Even a small EMI reduction improves affordability when households are juggling other expenses.
Financial planners advise borrowers to check their loan documents, keep track of reset dates and ask lenders about how soon the reduction will reflect. They also suggest that if EMIs fall, borrowers could continue paying the old amount voluntarily to shorten the loan tenure and save interest.
In the broader picture, RBI’s move signals steady monetary easing in response to slowing growth and controlled inflation. If inflation stays within the comfort zone, further adjustments cannot be ruled out next year. For now, borrowers can expect moderate relief and should monitor communication from their banks over the next few weeks.
