On 5 August 2026, the Reserve Bank of India kept the repo rate unchanged at 5.25%, maintaining the same level since the last rate cut in December 2025 when the central bank reduced the rate by 25 basis points. The six-member Monetary Policy Committee voted to keep the rate unchanged while maintaining its policy stance as 'neutral'. According to reports from Mint, this stability in the policy rate does not guarantee that home loan EMIs will remain unchanged throughout 2026. The RBI's decision comes as it awaits more data to assess the impact of higher oil prices on inflation across Asia's third largest economy.
As reported by Mint, newer floating-rate home loans are generally linked to external benchmarks such as the repo rate, which changes directly with policy rate movements. However, some existing loans may still be linked to MCLR (Marginal Cost of Funds-based Lending Rate), an internal benchmark set by individual banks. Shiv Garg, Director of Forteasia Realty, explained that while repo-linked loans are tied directly to the RBI's policy rate, MCLR is an internal benchmark reflecting the bank's cost of funds and reviewed periodically.
According to Mint analysis, even with the repo rate unchanged at 5.25%, borrowers can still experience EMI changes. For example, a ₹50 lakh home loan with a 2.50% margin would have an effective lending rate of 7.75% (approximately ₹41,018 EMI). If the bank increases its margin by 25 basis points, the new EMI could rise to ₹41,822, representing an increase of approximately ₹804 per month. Similarly, Vijay Raundal, Director of Teerth Realties, noted that MCLR-linked borrowers can see changes because the benchmark is determined internally by the bank with delays between one to four quarters.
As reported by Mint, historical data reveals significant differences in how MCLR responds to repo rate changes. During the rate-hike cycle from May 2022 to November 2024, when the RBI increased the repo rate by 250 basis points, MCLR increased by approximately 175 basis points (transmission of around 70%). Conversely, during the rate-cut cycle from February 2025 to December 2025, when the repo rate was reduced by 125 basis points to 5.25%, the median one-year MCLR declined by only around 20 basis points by April 2026 (transmission of around 16%). Hardik Shah, Director of Shyam Group, noted that MCLR borrowers need to watch their bank's reset cycle, which usually occurs every 6 to 12 months.
According to Mint analysis, the rate pause in 2026 does not automatically guarantee a frozen EMI for home loan borrowers. Shiv Garg emphasized that the benchmark, reset cycle, spread, and loan terms all matter significantly. Hardik Shah suggested that MCLR borrowers could consider shifting toward repo-linked loans because these tend to echo policy moves more quickly. He noted that when interest rates are expected to remain relatively stable, borrowers may benefit from choosing a benchmark that more closely tracks the RBI's policy rate.
