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If you are paying home loan then be happy. RBI has made such a big change that your interest rate can be reduced midway, that too without waiting for 3 years! Now if your credit score improves, you can immediately demand a lower interest rate from the bank and save thousands of rupees in EMIs.
New Delhi. Imagine, while paying EMI every month, you suddenly get a call from the bank and are told, “Sir, we are reducing your interest rate now”, it sounds like a dream, but the new rules of RBI are making it a reality. Now just improve your credit score and the bank can immediately make your home loan cheaper.
RBI has changed the rules of floating rate loan. After the new rule, banks can now reduce the interest rate on your home loan even without waiting for 3 years. Just your credit profile should be better. RBI has issued a new instruction on 29 September 2025, in which it has been said that banks can now reduce the spread on loans even before 3 years. Spread is the portion that banks add to the interest rate based on your credit risk and profile. Meaning, if your credit score has increased then you can immediately ask the bank to reduce the interest rate. The bank will re-assess your credit profile and reduce the interest rate if improvement is seen.
What used to happen earlier?
Earlier banks used to change the spread only after 3 years. Due to this, old customers did not get immediate benefit.
Since when is this rule applicable?
The new instruction has come into effect from 1 October 2025. Keep in mind that this change is not automatic. You will have to go to the bank yourself and request to reduce the interest rate.
How is the loan interest rate decided?
Interest rate is made up of 2 parts
- Benchmark rate (like RBI repo rate or T-bills)
- Bank Spread (based on credit score, profile, cost, etc.)
As your credit score improves, you can ask for a lower spread and this can reduce the EMI or loan tenure.
Easy ways to improve credit score
- Pay all EMIs and credit card bills on time.
- Keep credit utilization ratio less than 30%.
- Maintain a mix of secured and unsecured loan balance.
- Make one application at a time.
- Don’t close old credit cards, get them lifetime-free.
- Better score = possibility of immediate interest deduction
