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How the Recent Repo Rate Drop Benefits Kotak Home Loan Borrowers
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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.
The Reserve Bank of India cut the repo rate by 50 basis points to 5.5% on June 6, 2025—the third consecutive rate reduction
this year.
For home loan borrowers, this typically signals lower EMIs and reduced interest costs. However, the actual impact depends on the loan type and your bank's rate transmission process.
For Kotak home loan customers, this repo rate cut could mean lower EMIs or reduced interest costs, depending on whether your loan is linked to a
floating or fixed rate—helping you save more or pay off your loan faster.
This guide explains how repo rate changes translate into real impacts on your home loan—helping you navigate the connection between monetary policy and your monthly EMI payments.
What Does the June 2025 Repo Rate Cut Mean for Your Loan?
The June 2025 repo rate cut reduced the RBI's key policy rate from 6% to 5.5%. This represents a cumulative reduction of 100 basis points since the
beginning of 2025, when the repo rate stood at 6.5%.
When the repo rate falls, banks typically reduce their lending rates—but the transmission isn't automatic or immediate for all borrowers.
The impact on your Kotak home loan depends on whether your loan is linked to an external benchmark (like the repo rate) or an internal benchmark like MCLR (Marginal cost of fund-based lending rate).
For Kotak home loan borrowers, this translates into a rate drop from 8.75% to 7.99% per annum.
However, this doesn't mean all existing borrowers will automatically see this new rate—your loan agreement determines how and when rate changes apply to your account.
Will Your Kotak Home Loan EMI Decrease Automatically?
Whether your EMI decreases automatically depends on your loan type:
Repo-linked Loans (RLLR/EBLR): If your loan is linked to the repo rate, changes typically reflect within 1-3 billing cycles. Your loan agreement specifies the reset frequency—usually quarterly. The impact of repo rate change on home loan EMIs is more direct and faster for these loans.
MCLR-linked Loans: These loans adjust based on Kotak's MCLR (Marginal cost of fund-based lending rate), which factors in the bank's deposit rates,
operational costs, and profit margins. MCLR rates are reviewed monthly but don't always change immediately following repo rate cuts.
Fixed-rate Loans: These remain unaffected by repo rate changes until the fixed-rate period ends.
According to banking industry data, approximately 60% of home loans are now linked to external benchmarks, making rate transmission faster than in previous years.
Most banks, including Kotak, send notifications before implementing EMI changes. Ensure your contact details are updated to receive these alerts.
How to Check Your Loan Type
Your loan agreement clearly states whether your interest rate is linked to RLLR, MCLR, or is fixed. You can also:
How Much Can You Save with Lower Rates?
The reduction from 8.75% to 7.99% creates substantial savings for eligible borrowers. Here's what the numbers look like:
For a ₹50 lakh loan over 20 years:
For a ₹75 lakh loan over 20 years:
These calculations assume you're eligible for the new rate structure. Actual savings depend on your specific loan terms and when the rate change applies to your account.
Should You Switch from Fixed to Floating Rate Now?
Current economic conditions favour floating rates, but switching involves costs and considerations:
When to Consider Switching:
Factors to Evaluate:
Use online calculators to determine whether switching is financially beneficial in your case. The decision should be based on numbers, not just the current rate environment.
What If Repo Rates Rise Again in Future?
The RBI has adopted a "neutral" monetary policy stance, suggesting future rate changes will be data-dependent rather than aggressive. However, economic conditions can change:
Rate Cycle Considerations:
Protection Strategies:
Historical data shows that starting from a lower rate base provides cushion against future increases, even if rates rise moderately.
Note: Understanding Rate Transmission Delays
Banks don't adjust rates immediately after RBI announcements. Repo-linked loans can take 1-3 months to reflect rate changes, while MCLR-linked
loans may take even longer. This delay occurs as banks reassess their overall cost of funds and adjust their lending strategies accordingly.
Conclusion
The repo rate cut 2025 creates opportunities for significant savings, but the actual impact depends on your loan structure and timing.
Kotak's rate reduction from 8.75% to 7.99% benefits eligible borrowers substantially, though not everyone will see immediate changes.
Review your loan type, understand the timeline for adjustments, and consider your options if you're not seeing expected benefits.
The current low-rate environment may be temporary, so it’s important to maximise savings while rates remain favourable.
Monitor your loan statements, stay informed about policy changes, and don't hesitate to contact your lender if rate adjustments don't appear as expected.
This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained
in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss
resulting from or arising due to reliance on or use of any information contained herein.
Credit at sole discretion of Kotak Mahindra Bank Ltd and subject to guidelines issued by RBI from time to time. Bank may engage the services of marketing agents for the purpose of sourcing loan assets.
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