Clarification Request on Interest Rate Revisions for Home Loan

[itrajan7]

I am writing to seek clarification regarding the interest rate revisions applied to my home loan. I availed a home loan of ₹26,86,000, which was disbursed on 31st January 2025 at an initial interest rate of 8.6%. At the time, the RBI repo rate was 6.5%, and the spread applied by the bank was 2.1%.

On 7th February 2025, the RBI reduced the repo rate by 0.25%, bringing it down to 6.25%. However, the revised interest rate of 8.35% on my loan was implemented by the bank only from 1st March 2025.

Again, on 9th April 2025, the RBI further reduced the repo rate by another 0.25%, bringing it down to 6%. I have been informed that the corresponding revision in my loan interest rate will only be made effective from 1st May 2025.

I would like to understand:

1. Whether such a delay in reflecting RBI repo rate changes in my loan interest rate is standard and in accordance with applicable guidelines.
2. Is it legally permissible for the bank to implement the changes a full month after the RBI announcement?

Your guidance on this matter will be highly appreciated, as I would like to ensure complete transparency and alignment with the terms of the loan.

 

[Anurags]

First of all can, I assume you NACH/ECS mandate for emi deduction i sscheduled for 3rd, 5th or 10th of every month , so when the month start they already schedule those ecs mandates for that months and they can't alter so many many mandates of a large sum of customers , thats why they switch these changes from the next months and as to my knowledge , rbi also give them a timeline or a window of days , to align with new interest rates.I hope I had your query the best I can .

 

[itrajan7]

Yes My EMI is scheduled for 5th of every month.

But As on the date when Repo rate declared by the RBI then it should also be implemented on the loan account on the same date right?

 

[Anurags]

I don't think that how it works , banks do have a time frame for implementing those repo rates , because I also have two home loans and the changes can be seen on the next month EMI amount , or when you get an email from the bank itself that they the will be , changing the emi amount , then only you can consider it as changed repo rate for your home loan.Moreover , I have already mentioned that its a system generated thing , they schedule a whole lot of ecs mandates for ,a large sum of customers before the month gets started , that's why they can't change that the same month they got instructions from RBI, to summarise I would say it only changes with the next month emi.