RBI Repo Rate unchanged: What's in it for home loan, fixed deposit, bonds, and you?

Home loan borrowers and investors interested in fixed deposits and bonds were eagerly waiting for the RBI's repo rate announcement today. Borrowers were especially interested in another repo rate cut as it would have further reduced their EMIs.

What's in the repo rate announcement for borrowers, investors?

The RBI has decided to hold the current repo rate, instead of a further 25-basis-point cut expected earlier amid global trade and tariff uncertainties.

This article will help you understand the impact of repo rate announcements on home loan borrowers and investors planning to start a new fixed deposit or invest in bonds.

If the RBI reduces the repo rate, it would result in a further reduction of home loan interest rates. Since February, most banks have already reduced their repo-linked home loan interest rates by 100 basis points.

"In the current easing phase (Feb-June 2025), in response to the 100 bps cut in policy repo rate, banks have revised their repo linked EBLRs up by same magnitude. While many banks have reduced their MCLR rates in the range of 10-65 bps, despite having a longer reset period and is referenced to the cost of funds. PSBs reduced lending rates faster than Pvt banks," SBI Research said ahead of the RBI repo rate announcement.

When banks cut their home loan interest rates, borrowers benefit either by reducing their monthly EMI amount or the total loan tenure.

Currently, most banks are already offering home loan interest rates starting below 8%. The decision to keep the repo rate unchanged means borrowers can continue to enjoy the low EMIs they are paying on existing loans. Ahead of the festive season, it will also enable borrowers to get new loans at the current lower rates.

The decision to keep the repo rate unchanged is good news for those planning to start new fixed deposits. It means the banks may not further reduce their fixed deposit rates at least in the near future.

In the repo rate easing cycle, banks not only reduce their home loan interest rates but also the returns they offer on fixed deposits and savings accounts.

For instance, most of the banks have already reduced their FD rates in response to the multiple repo rate cuts announced by RBI since February 2025. SBI Research says, "almost all major banks have already reduced their TD rates in the range of 30-70 bps since February 2025."

Some banks are even reducing their savings account interest rates. They are doing this lower the cost of funds to match the transmission in lending rates.

"Many banks, including HDFC, AXIS, ICICI Bank and SBI, are strategically reducing savings interest rates by 20-25 basis points to lower the cost of funds to match the transmission in lending rates. Currently, the savings deposit rates of some banks are prevailing at a historical low, since their de-regulation in 2011," SBI Research said.

Another repo rate cut could have given banks a reason to further reduce their fixed deposit and savings account interest rates. However, such a decision will also depend on the appetite of banks to retain their deposit base.

Repo rate movements can affect bond yields. For instance, when the RBI increases the repo rate, the existing bonds with lower yields become less attractive. However, the opposite happens when the RBI reduces the repo rates. The decision to keep the repo rate unchanged means that there will be little impact on existing bonds or the new bonds in the near term.

All eyes will now be on the next RBI MPC meeting to be held two months later October 2025.