After RBI rate cut, should you reduce EMIs or shorten loan tenure?

The Reserve Bank of India (RBI) cut the benchmark repo rate by 25 basis points from 6.50 per cent to 6.25 per cent on Friday, February 7, 2025. This was the first rate cut in almost five years. Borrowers on flexible rate loans linked to the repo rate (home, auto, personal, etc.) stand to gain from the cut.

 

Gains for home loan borrowers 

The exact gain for each home loan borrower will depend on their current principal outstanding and interest rate. Let us assume that a borrower has a 20-year loan with a principal outstanding of Rs 75 lakh and