First up, your home loan EMI will only decrease if you have opted for floating rate home loan wherein the rate of interest is in line with the interest rates in the market.

But you should know that you may not always benefit from repo rate cut. If you took a loan before 2010, then you would have a relatively higher loan rate than the current bank rates. Borrowers who have taken loans before 2010 have to pay EMIs according to the prime lending rate concept and not base rates.

Additionally, banks don’t always pass on, or transmit, the rate cuts to their customers. While it is ideal that a low repo rate SHOULD translate into low-cost loans, it doesn’t always happen that way. This is because under the base rate system, banks have a base rate below which they cannot lend money.

What banks do is that they charge the base rate plus an additional interest rate, also known as a spread, as they deem fit.

Thus, banks get away with not reducing interest rate even if the central bank reduces its rates.

Note: If you are a borrower who took a loan before 2010 and are having a huge difference in the interest rate than the current rates, you can switch to the base rate by paying a fee.