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RBI raised the repo rate: what happens to your EMI?

6 min readFacts valid until 4 Dec 2026
Young couple on a sofa reading a letter and using a calculator

Short answer: On 7 October 2026 the RBI raised the repo rate by 0.25 percentage points to 5.50%. If your bank home loan is linked to the repo rate, your rate will go up at the next reset, within three months at most. Your lender must tell you, and you can choose a higher EMI, a longer tenure or a mix of both. A higher EMI costs much less in total. Fixed-rate loans don’t change.

The situation

Arjun and Kavya have a floating-rate home loan from a bank, so their rate can change during the loan. After the news they ask: will our EMI (the fixed amount we pay each month) go up, and when?

What the RBI decided

The repo rate is the rate at which the RBI lends money to banks for a short time. The RBI’s Monetary Policy Committee (MPC, the group that sets this rate) met from 5 to 7 October 2026. It voted to raise the repo rate by 25 basis points, from 5.25% to 5.50%. One basis point is one hundredth of a percentage point, so 25 basis points means 0.25%. The MPC also changed its stance (its general direction) from “neutral” to “calibrated tightening”. Its next meeting is on 2 to 4 December 2026.

Which loans change, and when

It depends on your benchmark, the outside or in-house rate your loan rate is tied to. Your sanction letter or KFS (Key Facts Statement, the short sheet that sums up your loan) names it.

Your loan What moves your rate When it changes
Bank loan linked to an external benchmark, often called EBLR or RLLR (repo-linked) The repo rate or another outside rate named in your agreement At the next reset date. Banks must reset at least once in three months
Older bank loan linked to MCLR (the bank’s own lending rate) The bank’s MCLR, which moves more slowly Once a year or more often, on the reset dates in your agreement
Loan from an NBFC or housing finance company The benchmark named in your agreement On the dates in your agreement. Ask the lender
Fixed-rate loan Nothing, for the fixed period Check whether the rate is fixed for the whole loan or only for some years

Since 1 October 2019, banks must link new floating-rate loans to individuals, such as home and car loans, to an external benchmark. Your rate is the benchmark plus a spread, the bank’s extra margin on top. The bank can raise the credit-risk part of the spread only if its view of your credit changes a lot, as your contract defines it. So a 0.25% repo rise should usually mean 0.25% more on your rate, not more.

What your lender must do

An RBI rule from 18 August 2023 covers EMI loans to individuals, home loans included. It applies to banks, NBFCs and housing finance companies, to existing borrowers too, and to loans on any benchmark:

  • Tell you straight away if your EMI or tenure (the number of months left) goes up because the benchmark rose.
  • Give you a choice: a higher EMI, a longer tenure, or a mix of both.
  • Let you prepay, meaning pay off part or all of the loan early, at any time.
  • Let you switch to a fixed rate, but only if the lender offers this. Any switching charges must be shown in your sanction letter.
  • Send you a statement every quarter (three months). It must show the principal (the amount borrowed) and interest repaid so far, your EMI, the number of EMIs left and your annual interest rate.

The RBI made this rule after borrowers complained that their tenure or EMI went up without clear notice or their agreement. So read every letter and quarterly statement after a rate rise.

Arjun and Kavya’s numbers

Fictional example: ₹30,00,000 left to repay, 216 months (18 years) left. Their rate goes from 8.25% to 8.50%. These are not real market rates. Calculated by Paisavy.

Their EMI now is ₹26,704.

After +0.25% Option A: higher EMI Option B: same EMI, longer tenure
EMI ₹27,164 (₹460 more) ₹26,704 (same)
Months left 216 226 (10 more)
Extra interest over the loan about ₹99,208 about ₹2,41,363

Option B feels easier each month, yet it costs about ₹1,42,155 more than option A over the life of the loan. If every future rise also goes into the tenure, the months add up quickly. After a total rise of 1% (to 9.25%), the same EMI would need 262 months, which is 46 more than today. Keeping the tenure would mean an EMI of ₹28,564, about ₹1,860 more.

A third way: a one-time prepayment of ₹50,725 would keep both their EMI and their tenure as they were before the rise. Their loan is floating-rate, so prepaying may carry no charge (see below).

Choosing between the options

  • If ₹460 more a month fits your budget, a higher EMI saves the most.
  • If your income is irregular, a lower EMI leaves more room each month. You can still prepay later, when you have a good month.
  • Prepay only after you keep an emergency fund. Money you prepay is hard to get back.
  • Prepaying is free on floating-rate loans to individuals, not for business, sanctioned (approved) or renewed from 1 January 2026. For older loans, read your agreement. See Paying off a loan early.
  • On an older MCLR loan, you can ask your bank to move you to its external benchmark. You both have to agree on the terms. If your loan can be prepaid free, the switch should cost only reasonable admin and legal charges. Compare the two rates first.
  • If even the old EMI is hard to pay, talk to your lender before you miss a payment. See My next EMI doesn’t fit.

What to check today

  1. Find your benchmark (EBLR/RLLR, MCLR or other) and your reset dates in your sanction letter or KFS. How to read a KFS shows where.
  2. Open your last quarterly statement. Note your EMI, EMIs left and your rate.
  3. When the rate-change letter comes, check that the new rate went up by the repo rise and no more.
  4. Tell your lender in writing whether you want a higher EMI, a longer tenure or a mix.
  5. If you plan to prepay, ask for the exact amount and any charge in writing.

Try it with your own numbers

→ Prepayment calculator: see what a one-time payment does to your EMI or tenure. The EMI calculator shows your EMI at the new rate.

Sources and review

Try it with your numbers
Prepayment calculator
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Educational information, not financial advice. Found an error? Tell us → · Corrections log

Frequently asked questions

Will my home loan EMI go up after the RBI repo rate hike?

If your bank loan is linked to the repo rate (EBLR or RLLR), your rate goes up at the next reset date. Banks must reset these loans at least once in three months. On 7 October 2026 the repo rate rose by 0.25% to 5.50%. Your lender may raise your EMI, lengthen your tenure or do both, and it must tell you.

Should I choose a higher EMI or a longer tenure when rates rise?

A higher EMI usually costs much less in total. In our fictional example, ₹30 lakh left over 216 months, a rise from 8.25% to 8.50% means ₹460 more a month. Keeping the EMI instead adds 10 months and about ₹1,42,155 more interest. If your income is irregular, the lower EMI can still be the safer choice.

What is the difference between EBLR and MCLR home loans?

An EBLR loan is tied to an outside rate, often the RBI repo rate, and banks must reset it at least once in three months. An MCLR loan is tied to the bank's own lending rate, which moves more slowly and resets once a year or more often. Your sanction letter or KFS (Key Facts Statement) shows which one you have.

Does a repo rate hike affect a fixed-rate loan?

No, not during the fixed period. A fixed rate stays the same whatever the repo rate does. Check your agreement, because some loans are fixed only for the first few years and then become floating. Personal loans are often fixed-rate, so their EMI usually doesn't change after a repo rate hike.

Can my bank increase my loan tenure without telling me?

No. Under an RBI rule from 18 August 2023, banks, NBFCs and housing finance companies must tell you straight away if your EMI or tenure goes up because the benchmark rose. They must let you choose a higher EMI, a longer tenure or a mix, and let you prepay at any time. Your quarterly statement must show the EMIs left.

Can I prepay my home loan to avoid a higher EMI?

Yes. In our fictional example, a one-time prepayment of ₹50,725 keeps both the EMI and the tenure as they were before a 0.25% rise. Floating-rate loans to individuals, not for business, sanctioned or renewed from 1 January 2026 have no prepayment charge. Keep an emergency fund first. Try the Prepayment calculator.