How a Repo Rate Hike Changes Your Home Loan EMI: Repo-Linked vs MCLR Loans Explained

The RBI is widely expected to raise the repo rate by 25 basis points on October 7, 2026 (see our explainer on the decision). The repo rate is currently 5.25%. If you have a floating-rate home loan, what happens to your EMI depends on one thing most borrowers never check: what your loan is linked to.

Two kinds of floating-rate loans

Repo-linked (external benchmark) loans. CNBC TV18 explains that the RBI required banks to link all new floating-rate retail loans, including home loans, to an external benchmark from October 2019, and the repo rate is the most widely used one. Banks must reset these loans at least once every three months. When the repo rate changes, your rate changes after the next reset.

MCLR-linked loans. MCLR is the Marginal Cost of Funds based Lending Rate, an internal benchmark each bank sets from its own cost of funds, including deposit rates. CNBC TV18 says it mainly applies to older loans sanctioned before the 2019 change. The change reaches you only on your reset date, which is often every six months or one year.

Why two borrowers with the same loan can see different EMIs

• A repo-linked borrower sees changes when the RBI moves, after the next reset.
• An MCLR borrower may see no change for months, then a change driven by the bank's costs rather than the RBI.

Mint reported in August that even with the repo rate steady at 5.25%, EMIs could still move: an MCLR bank can change its MCLR, and a repo-linked bank can change its margin (spread).

A worked example

Take a Rs 50 lakh home loan for 20 years. Say the repo rate is 5.25% and the bank's margin is 2.50%, giving a lending rate of 7.75%. This margin figure is the illustration used by Mint.

If the repo rate rises 25 basis points and the bank passes it on in full, the rate becomes 8.00%.

These EMIs are our own calculation using the standard EMI formula for the same loan size and tenure. Mint's quoted figure for the 7.75% case was about Rs 41,018, so small differences are normal depending on rounding.

Many borrowers keep the EMI fixed and let the loan tenure change instead. Ask your bank which it applies to you.

Banks pass rates on unevenly

Mint cited analysis of past cycles. When the RBI raised the repo rate by 250 basis points between May 2022 and November 2024, MCLR rose about 175 basis points, roughly 70% transmission. When it cut rates by 125 basis points between February and December 2025, the median one-year MCLR fell only around 20 basis points by April 2026, about 16%. Mint's experts noted banks tend to raise borrowing prices faster than they lower them.

What you can do

1. Find your benchmark. Check your loan sanction letter or statement for "repo-linked", "EBLR" or "MCLR".
2. Check your reset date and spread. This decides when a change reaches you.
3. If you are on MCLR, one expert quoted by Mint suggested borrowers consider switching to a repo-linked loan, which echoes policy moves faster. That helps when rates fall and hurts when they rise, so it is a choice about direction. Ask your bank about switching fees first.
4. Consider part-prepaying if you have spare cash, which cuts the principal that the higher rate applies to.

Facts checked October 1, 2026. General information, not financial advice. Check your own loan agreement.

Sources

• Mint, "Repo rate stays at 5.25%: Why your home loan EMI may still change in 2026" (August 10, 2026): https://www.livemint.com/money/personal-finance/repo-rate-stays-at-5-25-why-your-home-loan-emi-may-still-change-in-2026-and-what-historical-data-shows-11786364801563.html
• CNBC TV18, "Repo rate vs MCLR: Understanding how the two impact home loan EMIs" (August 4, 2026): https://www.cnbctv18.com/personal-finance/repo-rate-vs-mclr-understanding-how-the-two-impact-home-loan-emis-19961536.htm
• Mint, "RBI rate hike expected in October?" (October 1, 2026): https://www.livemint.com/market/stock-market-news/rbi-rate-hike-expected-in-october-what-it-mean-for-sensex-nifty-experts-decode-11790847271851.html