The Reserve Bank of India’s monetary policy committee (MPC) has begun its three-day meeting today starting September 29, 2025, in Mumbai. The key question on everyone’s mind: Will RBI cut the repo rate again and thus possibly lower home loan EMIs, or will it pause amid growth concerns? The decision, expected on October 1, will deeply impact borrowers, savers and the broader economy.
Since February 2025, RBI has trimmed repo rates by 100 bps from 6.5% to 5.5% after it held rates steady in August. For instance, if your Rs 50 lakh, 20-year home loan at 8.5 percent interest was disbursed in January, you would have gained significantly from a 100-bps rate reduction. This would shorten your loan tenure to 206 months and save around Rs 14.78 lakh in interest payments.
If you choose to reduce your EMI amount instead, your interest savings will be relatively lower. You will save around Rs 7.12 lakh instead of Rs 14.78 lakh by keeping EMIs constant.
"With the festive season underway, expectations are high that the Reserve Bank of India (RBI) may cut the repo rate by 25 basis points. If announced, the cut may aid growth while keeping inflation under control. For borrowers, any reduction in rates directly lowers the cost of loans," Adhil Shetty, CEO, BankBazaar.com.
Economists remain divided on the path RBI will take. SBI Research recently suggested a 25 basis points (bps) cut, saying, “There is merit in cutting rates now to support growth, especially with inflation expected to remain benign.” The report emphasized the importance of calibrated communication by RBI, cautioning against a Type II error—failing to cut rates when warranted. "CPI inflation for FY27 is tracking at 4 percent or less, and post-GST rationalization, October’s CPI could fall close to 1.1%, the lowest since 2004," the SBI note said. It added that a timely cut would project the central bank as forward-looking, especially as global yields are rising.
On the other hand, IDFC First Bank’s report forecasted a pause, stating, “Though real rates leave room for a cut, the need hinges on growth risks. GST cuts add 0.6 percentage points to GDP growth, but escalating US trade tensions could subtract 1 point. RBI may wait for clarity after the festive season and opt for a December cut if risks escalate.”
For you, as a home loan borrower, this MPC meeting will be crucial. A rate cut even a modest 25 bpscan meaningfully reduce monthly EMIs or shorten loan tenure, easing financial stress. Conversely, a pause means borrowing costs will stay put.
Since October 1, 2019, banks have linked floating-rate retail loans to an external benchmark, which is the repo rate in most cases. So, any changes in the repo rate directly influence the interest rates on these loans.
"If a rate cut does come through, use it as an opportunity to repay faster. Prepay a part of your loan, pay one extra EMI in a year, or put any surplus or festive bonus towards reducing your outstanding balance. Even small prepayments can cut your overall interest and shorten your loan tenure," said Shetty.
Bankers have largely ruled out cuts in this policy but anticipate at least one more cut before the financial year ends.
RBI Governor Sanjay Malhotra is expected to announce the MPC’s decision on Wednesday, October 1, at 10 AM. Markets and consumers alike will watch closely for RBI’s tone on growth, inflation, and the future rate trajectory.
Whether your home loan EMI goes down further depends on the RBI’s choice, an outcome that can affect millions of Indian households.
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