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Loans

Repo Rate and Your EMI: What the RBI Policy Decision Changes

The RBI repo rate is 5.25%, held on 5 August 2026. Repo-linked loans reset at least every three months; MCLR loans move on their reset date.

PN

Written by Priya Nair

Updated on 17 September 2026·6 min read

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The RBI repo rate is 5.25%. The Monetary Policy Committee kept it unchanged on 5 August 2026 and held its neutral stance. The next decision is due on 7 October 2026. A hold means your repo-linked home loan rate stays where it is. MCLR-linked loans can still change on their reset date.

Key facts

Item Current position
Policy repo rate 5.25%
Standing deposit facility rate 5.00%
Marginal standing facility rate and Bank Rate 5.50%
Stance Neutral
Last change Cut by 0.25 percentage point, from 5.50% to 5.25%, on 5 December 2025
Latest decision Unchanged, 5 August 2026 (MPC meeting of 3–5 August)
Next MPC meetings 5–7 October 2026; 2–4 December 2026; 3–5 February 2027
RBI projections for 2026-27 CPI inflation 5.0%; real GDP growth 6.7%

What the repo rate is and who sets it

The repo rate is the rate at which the Reserve Bank lends to banks for short periods under its liquidity adjustment facility. The Monetary Policy Committee, chaired by the RBI Governor, sets it. The 2026-27 calendar has six meetings, and the August decision was announced on the meeting’s last day.

In August the committee voted unanimously to hold. Its resolution said headline inflation had moved above target, mainly because of food and fuel prices. It wanted more clarity on the path of inflation before changing rates.

How your loan’s benchmark passes on a change

How quickly a repo change reaches your EMI depends on the benchmark written into your loan agreement. The RBI’s Interest Rates on Advances Directions, 2025 set the rules:

Benchmark Which loans use it When your rate changes
External benchmark (EBLR), often the repo rate All new floating-rate personal and retail loans, such as home and auto loans, and MSME loans At least once every three months
MCLR Floating-rate loans sanctioned or renewed from 1 April 2016 until the external benchmark rule applied On the reset date in your contract; the reset period is one year or less and matches the MCLR tenor
Base rate Floating-rate loans sanctioned between 1 July 2010 and 31 March 2016 Banks review the base rate at least once a quarter
Fixed rate Loans with a rate fixed for the whole tenor Never

The external benchmark can also be a 3-month or 6-month Treasury bill yield published by FBIL. A bank must use one benchmark for each loan category.

Your rate equals the benchmark plus a spread. Under an external benchmark, the credit risk premium in that spread can change only if your credit assessment changes substantially, as agreed in the contract. Other parts of the spread can change once every three years. A bank may cut them sooner to keep customers. Our explainer on how loan interest rates work in India covers spreads and benchmarks in more detail.

EMI or tenure: the RBI rules on resets

When a floating rate changes, your lender can raise or lower the EMI, the number of EMIs, or both. The RBI’s circular on resetting floating rates on EMI-based personal loans, dated 18 August 2023 and updated on 1 October 2025, sets these rules:

  • At sanction, the lender must explain how a benchmark change can affect your EMI and tenor. Any later increase must be told to you immediately.
  • At a reset you can choose a higher EMI, a longer tenure, or a mix of both.
  • You can prepay in part or in full at any time during the loan.
  • Since 1 October 2025, offering a switch to a fixed rate at reset is at the lender’s option. It was compulsory before that date.
  • A longer tenure must not cause negative amortisation, where the EMI no longer covers the interest.
  • Every quarter the lender must give you a statement showing principal and interest paid so far, the EMI, EMIs left and the annual rate for the whole tenor.

Worked example

Take a new ₹50 lakh home loan for 20 years at 8.00%. The EMI is ₹41,822.

Rate change New EMI (same tenure) New tenure (same EMI)
Up 0.25 point to 8.25% ₹42,603 (₹781 more) About 252 months (12 more)
Down 0.25 point to 7.75% ₹41,047 (₹775 less) About 230 months (10 fewer)

These figures are our own calculation for a loan at its first month. Run your own balance and rate through the EMI calculator.

Switching benchmark or lender after a hold

If your loan is still on MCLR or base rate, a repo-linked loan may now be cheaper. You can switch benchmark with your own bank or move the loan to another lender.

  1. Ask your bank for the current rate on a new external-benchmark loan of the same type, tenor and amount.
  2. Request a switch to the external benchmark in writing. Individual floating-rate borrowers who can prepay without charges get the switch without fees, apart from reasonable administrative or legal costs. The new rate must match a new loan of the same kind, and the switch is not treated as a foreclosure.
  3. If the offer is poor, compare offers from other lenders. Floating-rate loans taken by individuals for non-business purposes carry no prepayment charge, so closing the old loan costs no penalty.
  4. Before you move, add up processing fees, legal and valuation charges, and any stamp duty on the new loan.

Our guide to home loan balance transfer covers moving to a new lender step by step.

What to check before the October and December meetings

  • Find the benchmark and spread in your sanction letter or Key Facts Statement.
  • Note your reset date. An MCLR loan with a yearly reset may not reflect any change for months.
  • Decide in advance whether you want a change to hit your EMI or your tenure, and tell your lender.
  • Keep your quarterly statement and check that each reset matches the benchmark movement.

Rate decisions cannot be predicted, so plan your budget on the current rate and treat any cut as a bonus.

Frequently asked questions

What is the current repo rate?

5.25%, held by the Monetary Policy Committee on 5 August 2026. It has been at this level since the cut of 5 December 2025.

When is the next RBI policy announcement?

The next meeting runs from 5 to 7 October 2026, and the decision is expected on 7 October. The one after that runs from 2 to 4 December 2026.

Will my home loan EMI change if the repo rate is unchanged?

Not because of the policy itself if your loan is repo-linked. An MCLR-linked loan can still move at its reset date if the bank’s MCLR has changed.

How soon does a repo rate cut reach my EMI?

For external-benchmark loans, the rate must be reset at least once every three months. Your agreement states the exact reset dates.

Can my bank increase my tenure without asking me?

The bank must tell you about any increase straight away and give you the choice of a higher EMI, a longer tenure, or both.

Can I switch from MCLR to a repo-linked loan?

Yes. Individual floating-rate borrowers can switch without charges other than reasonable administrative or legal costs.

Sources

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