A reduction in the repo rate can significantly impact your Equated Monthly Installments (EMIs). Here's what you need to know: Impact on EMIs - *Lower Interest Rates*: When the Reserve Bank of India (RBI) cuts the repo rate, banks can borrow money at a lower rate. This reduction is often passed on to consumers, leading to lower interest rates on loans. - *Reduced EMIs*: With lower interest rates, your EMIs may decrease, making it more manageable to repay your loan. For instance, a 25-basis point rate cut on a ₹50 lakh home loan at 8.50% for 20 years can lower the EMI from ₹43,059 to ₹42,452, saving ₹607 monthly ¹. - *Floating Rate Loans*: If you have a floating rate loan, you're more likely to benefit from a repo rate cut. Your loan's interest rate is tied to market rates, so a reduction in the repo rate will directly impact your EMI. Benefits for Borrowers - *Increased Loan Eligibility*: Lower interest rates can increase your loan eligibility, making it easier to qualify for a loan. - *Shorter Loan Tenure*: You can choose to retain your current EMI amount and reduce the loan tenure, saving on interest costs over the long term ². Key Considerations - *Individual Bank Policies*: Banks may vary in the extent of the reduction they pass on to borrowers. Some might pass on the full reduction, while others might only partially reduce the interest rate. - *Fixed vs. Floating Rates*: If you have a fixed-rate loan, a repo rate cut won't affect your EMI. However, if you have a floating-rate loan, you can expect a reduction in your EMI ³. Keep in mind that the actual impact of a repo rate cut on your EMI will depend on your loan terms, interest rate, and lender policies. It's essential to review your loan agreement and consult with your lender to understand how a repo rate cut will affect your specific situation.