All attention is focused on RBI Governor Sanjay Malhotra as he is set to announce the first Monetary Policy for the Financial Year 2025-26 on April 9, 2025, following the three-day Monetary Policy Committee (MPC) meeting.

This is a significant event for markets, financial institutions, and home loan borrowers across India. Experts expect the RBI to reduce the repo rate by at least 25 basis points (bps), marking a policy shift aimed at boosting consumption and easing borrowing costs.

Why the Repo Rate Cut Matters

The repo rate is the interest rate at which the RBI lends money to commercial banks. A reduction in this rate results in lower borrowing costs for banks, which in turn translates to reduced loan interest rates for end consumers.

With many banks and housing finance companies (HFCs) tying their retail floating-rate loans to the repo rate, a cut will have a direct impact on home loan interest rates.

As of now, banks such as Central Bank of India, Union Bank, PNB, and Bank of India are already offering interest rates between 8.1% to 8.15%, and the repo rate cut could bring these below 8%, making home ownership cheaper for many.

Banks Have Already Started Rate Transmission

Even before the expected cut in April, several banks have already reduced their home loan interest rates.

• Public sector lenders have passed on the entire 25 bps repo rate cut from February 2025 to both new and existing borrowers.

• Private sector banks like HDFC Bank, Axis Bank, and ICICI Bank have trimmed interest rates by 5-10 bps on fresh loans.

As per RBI guidelines, banks must review interest rates at least once every quarter, and while some may delay transmission, most banks align quickly after major rate moves.

Impact on Existing and New Borrowers

All retail floating-rate loans sanctioned post-October 1, 2019, are linked to an external benchmark, which is usually the repo rate.

This means when RBI reduces the repo rate, it directly lowers the effective interest rate for borrowers. The final rate is calculated using:

• Repo Rate

• Bank Spread

• Credit Risk Premium (based on borrower’s credit score)

Hence, both new and existing borrowers can benefit if the cut is announced.

Cheapest Home Loan Offers as of April 4, 2025

Here's a comparison of home loan interest rates (post February 2025 rate cut) for a ₹50-lakh loan over 20 years:

Central Bank of India and Union Bank of India – 8.10%

• Lowest interest rates available

• EMI: ₹42,134

• Down from 8.35% in January 2025

Bank of India, Indian Overseas Bank, and Punjab National Bank – 8.15%

• Slightly higher rates

• EMI: ₹42,290

• Reduced from 8.4% in January 2025

Canara Bank – 8.2%

• EMI: ₹42,446

• Previously at 8.45%

SBI and LIC Housing Finance – 8.25%

• EMI: ₹42,603

• SBI’s rates linked to repo rate

• LIC Housing Finance is not repo-linked but follows market trends

Indian Bank and Bajaj Finserv – 8.25%

• Same EMI as SBI: ₹42,603

• NBFCs like Bajaj Finserv align with bank offerings despite not being repo-linked

Bank of Baroda – 8.4%

• EMI: ₹43,075

• No change from January 2025

PNB Housing Finance – 8.5%

• EMI: ₹43,391

• Higher rate compared to PSU banks

Aditya Birla Housing Finance – 8.6%

• EMI: ₹43,708

• One of the higher offerings among NBFCs

Kotak Mahindra Bank – 8.65%

• EMI: ₹43,867

• Rate down by 10 bps from January 2025

HDFC Bank – 8.7%

• EMI: ₹44,026

• 5 bps lower than January 2025

Axis Bank and ICICI Bank – 8.75%

• EMI: ₹44,186

• No change from January 2025

What Happens if RBI Cuts Repo Rate on April 9?

If the repo rate is cut by another 25 bps, borrowers can expect the following:

• Interest rates may fall below 8% for many banks

• Monthly EMIs will reduce, improving affordability

• New borrowers can lock in lower rates, especially with repo-linked loan products

• Banks may announce further cuts quickly after the RBI announcement

Final Thoughts: A Big Opportunity for Borrowers

The April 9 policy meeting is crucial. With the possibility of home loan interest rates dipping below 8%, borrowers should stay updated and consider refinancing or negotiating with their lender.

This is a rare opportunity to save significantly on interest costs over the life of the loan. A 0.25% cut in interest may appear small but can translate into lakhs of rupees in long-term savings.

Quick Comparison – EMI on ₹50 Lakh Loan for 20 Years (Post Feb Rate Cut)

Stay tuned for the RBI's final announcement on April 9, and keep an eye out for updated rate cards from your preferred lenders. You may want to act quickly if you’re planning to buy a home or switch your lender to benefit from the expected drop in rates.

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