When RBI cuts the repo rate, your home-loan EMI does not fall the next morning. The cut has to travel through a series of plumbing, and how fast that travel happens and how much actually reaches you varies meaningfully by bank. The word for this travel is passthrough, and it is the single most useful concept for understanding whether your bank is on your side.
The plumbing: repo to EBLR to your loan
The RBI repo rate is the rate at which the central bank lends overnight money to commercial banks against government-security collateral. It is the headline policy rate. When the Monetary Policy Committee cuts the repo by 25 bps, it is signalling that money should get cheaper across the system.
For your home loan, the connection is direct. Since October 2019, retail floating-rate loans have been pegged to an external benchmark. Most banks chose the repo rate itself. Your loan's External Benchmark Lending Rate (EBLR) equals the repo rate plus a fixed spread set at the time of sanction. So mechanically, when RBI cuts 25 bps, your EBLR should drop 25 bps. Your spread stays the same. The bank cannot widen it on you mid-loan.
The catch is timing. The reset is not instant.
The 3-month rule (and its loopholes)
RBI's rule says banks must reset the EBLR-linked rate at least once every three months. In practice, almost every major bank resets on the 1st of each calendar quarter: 1 April, 1 July, 1 October, 1 January.
That gives you a worst-case lag of three months. If RBI cuts on 6 February, the next reset is 1 April. You wait about 53 days for the cut to reach your EMI. If the cut lands on 1 January, you get it the same day. If it lands on 31 December, you get it the next day. There is luck in the calendar.
The loophole is which day inside the quarter the bank uses to compute the reset value. Some banks use the average repo rate over the quarter. Some use the rate prevailing on the 15th of the previous month. Some use the rate on the day before the reset. The choice is buried in the loan agreement and most borrowers never read it. It usually does not matter much, because the repo does not bounce within a quarter, but when it does (RBI cut on 6 February, hiked again on 7 March in some hypothetical world), the choice can flip whether your cut lands.
Why partial-pass happens
In theory, the passthrough on an EBLR loan should be 100%. The repo moves 25 bps, your loan moves 25 bps. The spread is fixed, the repo is the variable, math is math.
In practice, you sometimes see the full move and sometimes you see less. The reasons divide cleanly into two buckets.
Bucket one is the bank's discretion on new loans. The spread is fixed for existing borrowers but the bank can quote any spread it wants on a new sanction. If a bank wants to absorb part of a rate cut to preserve margins, it widens the spread it offers to new customers by 10 to 15 bps. The headline EBLR appears to fall along with the repo, but the loan you get if you walked in tomorrow is priced higher than it would have been if the spread had stayed put. This is invisible to your existing loan but it is the dominant explanation for why aggregate banking-system passthrough numbers look weaker than 100%.
Bucket two is the reset timing. If your reset date is 1 October and the repo cut was on 8 August, you get the cut on schedule. If your reset date is 1 April and the repo was hiked on 8 March (small, surprise), you also get that hike on schedule, but for one quarter you were on the lower rate. Over a year of policy moves, the small mismatches average out.
How to tell if your bank is dragging its feet
Three checks. None of them require talking to your relationship manager.
One: read your sanction letter and find your reset date. Mark it on your calendar for the next four quarters. On each reset date, log into your loan account and confirm the rate has moved if the repo moved during the prior quarter. If it has not, the bank owes you an explanation in writing.
Two: compare your bank's current EBLR for new loans to what you are paying. EBLR for new loans is published on the bank's website. Subtract your spread (in your sanction letter) from your current effective rate. The number should match the bank's published EBLR. If it is higher than what new customers are getting, your spread was set higher than the bank's current offer. That is not retroactive: the bank kept its word on your spread. But it tells you what the market thinks your loan is worth, which is useful if you are considering a balance transfer.
Three: track the bank's repo-passthrough record. RBI publishes aggregate transmission data quarterly in the Monetary Policy Report. The October 2025 report showed that PSB EBLR rates had moved 90 bps for every 100 bps of cumulative repo moves over the prior 18 months, while private banks moved 84 bps. Both are substantial but neither is full. A bank that consistently lags the cohort is one to put on watch.
A 25 bps cut in rupees: what it's actually worth
Make it concrete. ₹50 lakh outstanding, 15 years remaining tenure, 8.50% current EBLR. EMI: ₹49,237. A 25 bps cut takes the rate to 8.25%. New EMI: ₹48,485. Monthly saving: ₹752.
Over the remaining 180 months, that is roughly ₹1.35 lakh in saved interest. Per quarter of policy easing, against a loan of this size. The arithmetic gets bigger with larger principals and earlier in the loan tenure. It gets smaller as you get closer to closure.
The opposite move (a 25 bps hike) does the same in reverse. Most borrowers do not feel the hikes any more sharply than the cuts because the EMI changes by the same magnitude. What they feel is the unpleasant surprise of an EMI that just went up unannounced. The unannouncement is the system working as designed: the bank does not need your sign-off to apply the reset.
Bottom line
The system is more transparent than it used to be. Before 2019, you mostly took your bank's word that they were passing through the cuts, and they often were not. After 2019, the math is on autopilot and the lag is capped at one quarter. The only real lever you have is your spread, which is set at sanction and stays for life. So negotiate hard at the start, and watch your reset dates after.
Capera tracks live EBLR and MCLR across 15 Indian banks daily, refreshed once a day at IST 06:00. See the current loan-rate leaderboard or compute your EMI with today's actual EBLR on the loan EMI calculator.
