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Despite the Reserve Bank of India repeatedly reducing the repo rate, home loan customers are not able to get the benefit of affordable EMI. Many banks and NBFCs are not passing the reduced rates to customers on time, due to which the interest burden is increasing inversely. As a result, lakhs of borrowers are getting trapped in expensive loans and long term EMIs.
New Delhi. IT professional Suresh’s problem is like that of many home loan customers. From January 2025 till now, RBI has reduced the repo rate by a total of 1.25%, but Suresh’s EMI neither decreased nor there was any major change in the loan tenure. Even after the latest cut of 0.25% issued on 8th December, their NBFC is not giving any relief. It is common for many banks and NBFCs to delay reducing rates, while the impact of the increase is passed on to customers immediately.
Why are the rates not decreasing? Banks and NBFCs are increasing their margins
Experts say that even after the repo rate is reduced, not all financiers reduce interest rates immediately. Public sector banks usually implement the cuts early, while in private banks and NBFCs the process drags on till the end of the quarter. Many NBFCs borrow money from banks, so when banks delay, NBFC customers are also affected. This year, many loan institutions increased their margins instead of reducing interest, due to which customers did not get relief in rates.
Deduction is also determined by which benchmark the loan is linked to.
Home loan can be linked to different benchmarks – MCLR, BPLR, RLLR, EBLR. To bring transparency, RBI had directed to link floating rate loans to the repo rate. Despite this, many customers are not getting the benefit because banks increase margins and pass on only a small part of the repo cut. According to experts, except fixed rate loans, all floating rate loans should see a reduction, but the reality is different.
What to do if EMI does not reduce? Important steps for customers
If no reduction in EMI is seen even after three to six months, the first step is to send a written complaint to your bank or NBFC. If you do not get a response, you can request for re-pricing to reduce the interest rate or transfer the home loan balance to another bank. Balance transfer can often save 0.25% to 1% interest. Experts say that if the bank is continuously increasing the margin despite the repo cut, then the customers must consider other options.
