How much you can save on home and auto loan EMIs as RBI cuts repo rate by 25 bps to 5.25%; check details

RBI rate cut: The Reserve Bank of India has reduced the repo rate by 25 basis points to 5.25% in its December monetary policy meeting. This is the fourth interest rate cut announced by the central bank in 2025. A total of 125 bps or 1.25% repo rate cut has been announced since the beginning of this year, bringing the repo rate to its lowest level since July 2022.

The latest interest rate comes amid an easing inflation rate, which fell to 0.25% in October 2025, well below the Reserve Bank of India's 4% target and the ninth consecutive month of decline. Meanwhile, the domestic GDP remains robust, expanding by 8.2% in the September quarter.

RBI policy meeting outcome in 2025

Following the RBI announcement, rate-sensitive sectors, including NIFTY Bank, NIFTY Financial Services, NIFTY Realty, and NIFTY Auto, saw strong investor interest, rising between 1% and 2%. Meanwhile, benchmark indices, NIFTY50 and SENSEX are also in the green, rising 0.3% and 0.5% respectively.

Experts believe the RBI’s latest interest rate will further bolster domestic demand and make borrowing more affordable for retail customers. The RBI rate cut will also benefit borrowers with home loans, car loans and other retail floating-rate loans, as banks are likely to reduce interest rates.

Retail floating-rate loans issued after October 2019 are linked to external benchmarks, usually the repo rate, which means that EMIs adjust according to changes in the repo rate. Domestic banks typically pass on these rate cuts to borrowers either fully or partially, depending on their interest reset cycle, which generally occurs within 1 to 3 months.

Home loan EMIs savings

Homebuyers across India who are eligible for floating interest rate home loans may see their interest rates go down by up to 25 basis points, in line with the RBI’s announcement.

Here is how much you can save each year on home loans of ₹30 lakh, ₹50 lakh and ₹75 lakh, assuming that the tenure is 20 years and the average median interest rate of 8.00% (before today’s repo rate cut).

*yearly savings calculated by multiplying the difference by 12

**EMI calculated at the median interest rate of 9.00% before the RBI rate cut from Feb 2025 onwards.

The above table demonstrates how interest rate cuts benefit home loan borrowers. With just a 0.25% repo rate cut by the RBI, borrowers can save between ₹5,580 and ₹13,944 per year depending on the loan amount and if the bank passes on the entire benefit to borrowers.

Even this minor rate cut makes meaningful savings over the longer tenure, reducing the financial burden and also making new loans more affordable.

Auto loan EMIs savings

The repo rate cut is also likely to benefit those who have taken car or two-wheeler loans, which also fall under the retail loan category. Auto loan borrowers may also see their interest rates go down by 25 basis points (0.25%), provided that the bank passes on the full benefit to them.

Here is how much auto loan borrowers can save on loans of ₹5 lakh, ₹7 lakh, and ₹10 lakh, given that the tenure is five years and the average median interest rate of 8.75% per annum (before the repo rate cut).

Overall, the latest RBI repo rate cut is expected to ease the EMI burden, boost long-term savings and make credit more affordable for retail customers and MSMEs. Retail consumers with home, auto or other floating-rate loans stand to benefit as EMIs reduce if banks pass on the full rate cut benefits to loan borrowers.