Major banks hike loan rates after RBI move: Check if your EMIs will rise | Personal Finance
The Reserve Bank of India’s (RBI’s) decision to raise the repo rate to 5.50 per cent has prompted several banks to increase their repo-linked lending rates, potentially raising borrowing costs for home, car and personal loan customers. Punjab National Bank (PNB), Bank of India, Bank of Baroda and Indian Bank are among the lenders that have revised their rates.
The RBI raised the repo rate by 25 basis points from 5.25 per cent on October 7 and shifted its policy stance from neutral to calibrated tightening. This signals a greater focus on containing inflation and leaves borrowers facing uncertainty over the direction of interest rates.
For existing borrowers, the immediate impact will depend on the interest rate benchmark linked to their loan, the lender’s reset schedule and whether the bank adjusts the equated monthly instalment (EMI) or extends the repayment period.
Which banks have increased lending rates?
The following banks have announced increases in their repo-linked lending benchmarks.
| Bank | Earlier rate | Revised rate | Effective date |
| Punjab National Bank | 8.10% | 8.35% | 08/10/2026 |
| Bank of India | 8.10% | 8.35% | 07/10/2026 |
| Bank of Baroda | 7.90% | 8.15% | 08/10/2026 |
| Indian Bank | 7.95% | 8.20% | 01/10/2026 |
| Indian Overseas Bank | 8.10% | 8.35% | 08/10/2026 |
| UCO Bank | 8.05% | 8.30% | 08/10/2026 |
| Tamilnad Mercantile Bank | 8.25% | 8.50% | 08/10/2026 |
| Karur Vysya Bank | 8.55% | 8.80% | 08/10/2026 |
Bank rate revisions reported following the RBI’s policy decision. Borrowers should check their lender’s latest published rate and the benchmark applicable to their loan.
A bank’s repo-linked benchmark is not necessarily the final interest rate charged to a customer. The actual rate also depends on the spread charged by the lender and the terms of the loan.
How will the rate hike affect your home loan EMI?
The effect will vary according to the outstanding loan amount, remaining tenure and the interest rate applicable to the borrower.
Consider a borrower with an outstanding home loan of Rs 40 lakh and a remaining tenure of 20 years. If the interest rate rises from 8.5 per cent to 8.75 per cent, the monthly EMI would increase from approximately Rs 34,710 to Rs 35,340, assuming the outstanding principal and remaining tenure stay unchanged.
That translates into an increase of around Rs 630 a month, or roughly Rs 7,560 a year. The actual impact will depend on the borrower’s loan terms and the rate revision passed on by the lender.
The increase may appear manageable in isolation, but it comes on top of other household expenses. Borrowers with multiple loans or limited monthly savings could face greater pressure on their budgets.
Why do banks raise lending rates after an RBI hike?
The repo is the interest rate at which the RBI lends short-term funds to banks against eligible collateral. When the central bank raises it, the cost of such borrowing increases.
Banks may respond by raising interest rates on loans linked to the repo rate. However, the transmission is not identical across all products because lenders also consider their funding costs, margins and loan agreements.
Loans linked to an external benchmark generally reflect policy rate changes more directly than loans linked to the marginal cost of funds-based lending rate (MCLR). The timing of the change in a borrower’s EMI or interest rate depends on the applicable terms and reset frequency.
Borrowers should therefore avoid assuming that every loan will become more expensive immediately or by exactly 25 basis points.
What should existing home loan borrowers do?
Adhil Shetty, chief executive officer of BankBazaar, said the impact on home loan customers could come through a higher EMI or a longer repayment tenure, depending on the lender.
Borrowers should ask their bank how the revised rate will be applied and whether the change will affect the EMI, the remaining tenure or both.
There are three steps they can consider.
Check the revised interest rate: Review the latest loan statement and confirm the benchmark, spread and reset date with the lender.
Assess the household budget: Calculate whether the higher EMI would affect monthly savings, essential spending or other loan repayments. Keep a buffer for further increases.
Consider part-prepayment: If surplus funds are available after maintaining an emergency reserve, a part-prepayment can reduce the outstanding principal and the interest payable over the remaining tenure. Check whether any applicable charges or loan conditions affect the decision.
Borrowers should also compare the cost of switching lenders with the potential savings before transferring a loan. A lower advertised rate may not necessarily compensate for processing fees and other expenses.
Will all borrowers see higher EMIs?
No. The impact depends on the type of loan and its benchmark. Borrowers on fixed-rate loans may not see an immediate change, subject to the terms of their agreement. Those on repo-linked floating-rate loans are more directly exposed to changes in the benchmark, while MCLR-linked borrowers follow a different reset mechanism.
Banks may also revise deposit rates as their funding requirements change, although the timing and extent of any increase will vary.
The RBI’s shift towards calibrated tightening makes it important for borrowers to plan for the possibility that interest rates could remain elevated or rise further. However, the latest decision does not guarantee another increase.
For households with long-term loans, the priority should be to understand the revised repayment schedule, maintain sufficient monthly cash flow and avoid relying on an early return to lower interest rates.
