The Reserve Bank of India has provided a significant benefit to the middle class by announcing a reduction in the repo rate (RBI Repo Rate). The repo rate has been lowered by 0.25%, bringing it down from 6.50 to 6.25. Will I need to visit the bank to adjust my EMI?

How the EMI will decrease following a cut in the repo rate

It is anticipated that banks might soon reveal a decrease in the interest rates on your loans. If banks implement interest rate reductions, the EMIs for your personal loan, car loan, and home loan will decrease.

You might be wondering how the RBI’s repo rate cut will affect your loan EMI. In fact, banks offer loans based on two types of interest rates.

First: banks offer loans at a fixed interest rate, meaning the EMI remains the same from start to finish, regardless of whether the RBI raises or lowers the repo rate. Fixed-rate loans will not be impacted by changes in the repo rate.

Second: if your loan is on a floating rate, then the EMI can fluctuate with changes in the repo rate. Following a repo rate cut by the RBI, the EMIs or tenure for borrowers with floating-rate loans may decrease.

If your bank has also adjusted the interest rate following the Reserve Bank’s repo rate change, you do not need to visit the bank. When you obtained the loan, if you selected an EMI that adjusts according to the repo rate change, then your EMI will be altered. However, if you opt for a change in loan tenure, the duration will be shortened.

Nonetheless, if you choose to adjust the tenure and wish to lower the EMI, a visit to the bank will be necessary. By going to the bank, you can modify either the EMI or the tenure based on your preferences.