Home Loan Interest Rates After the RBI Repo Rate Hike: New Bank Lending Rates and EMI Impact
Home loan interest rates are going up. After the Reserve Bank of India (RBI) raised the repo rate by 25 basis points to 5.5% on October 7, 2026, banks including Bank of Baroda, Punjab National Bank, Indian Bank, Indian Overseas Bank and Bank of India raised their repo-linked lending rates by the same 25 basis points, Business Standard reported. For a ₹50 lakh, 25-year loan at 7.5%, that adds about ₹817 to the monthly EMI.
If you already have a home loan, when will your rate change, and should you pay a higher EMI or accept a longer tenure? Here's what you need to know.
Key Takeaways
- RBI repo rate: 5.5% after a 25 bps hike on October 7, 2026, with the policy stance changed to "calibrated tightening".
- Banks raised repo-linked lending rates (RLLR) by 25 bps; for example, Bank of Baroda's rate is now 8.15% and PNB's 8.35%.
- Existing repo-linked loans are typically repriced within about 90 days.
- GoPocket calculation: on a ₹50 lakh, 25-year loan, keeping the EMI unchanged would stretch the tenure by about 22 months instead.
Which Banks Have Raised Lending Rates?
| Bank | Benchmark | Old rate | New rate |
|---|---|---|---|
| Bank of Baroda | Baroda Repo Based Lending Rate | 7.90% | 8.15% |
| Punjab National Bank | Repo-linked lending rate | 8.10% | 8.35% |
| Indian Bank | Repo-Linked Benchmark Lending Rate (from Oct 8) | 7.95% | 8.20% |
| Indian Overseas Bank | Repo-linked lending rate | 8.10% | 8.35% |
| Bank of India | Repo-Based Lending Rate | 8.10% | 8.35% |
| UCO Bank | UCO Float repo-linked rate (from Oct 8) | 8.05% | 8.30% |
| RBL Bank | Repo-linked lending rate | — | 8.50% (as of Oct 7) |
Source: Business Standard, October 8–9, 2026. Bank of Baroda's old rate derived as new rate minus the 25 bps hike. Your actual loan rate = benchmark rate + your bank's spread.
What Is a Repo-Linked Lending Rate?
A repo-linked lending rate (RLLR), also called an external benchmark lending rate (EBLR), is a loan benchmark tied directly to the RBI's repo rate. Your bank adds a fixed margin, or spread, on top. For example, Bank of Baroda's new RLLR of 8.15% is a spread of 2.65 percentage points over the 5.5% repo rate.
Older loans may be linked to the MCLR (marginal cost of funds-based lending rate), an internal benchmark that moves more slowly. At end-June 2026, 68.2% of outstanding floating-rate loans were linked to external benchmarks and 29.6% to MCLR, according to RBI data cited by Business Standard.
How Much Will Your Home Loan EMI Rise?
GoPocket calculated EMIs using the standard reducing-balance formula for a 25 bps increase:
| Loan | EMI at 7.50% | EMI at 7.75% | Extra per month |
|---|---|---|---|
| ₹30 lakh, 20 years | ₹24,168 | ₹24,628 | ₹461 |
| ₹50 lakh, 25 years | ₹36,950 | ₹37,766 | ₹817 |
| ₹75 lakh, 20 years | ₹60,419 | ₹61,571 | ₹1,152 |
Method: EMI = P × r × (1+r)n ÷ [(1+r)n − 1], where P is the loan amount, r the monthly rate and n the number of months. Figures are for a fresh loan at full tenure and are illustrative.
The ₹50 lakh example matches BankBazaar CEO Adhil Shetty's estimate of about ₹817 a month, as quoted by Business Standard. Over the full 25 years, that's about ₹2.45 lakh of extra interest.
Higher EMI or Longer Tenure: Which Is Better?
Many banks don't raise your EMI automatically. Instead, they extend the loan tenure. Here's the trade-off, using GoPocket's calculation for the ₹50 lakh, 25-year loan:
- Option 1 – pay a higher EMI: about ₹817 more a month; the loan ends on schedule.
- Option 2 – keep the EMI at ₹36,950: the tenure stretches from 300 months to about 322 months, roughly 22 extra EMIs. Those 22 extra payments add up to about ₹8 lakh, far more than the ₹2.45 lakh extra cost of Option 1.
So if your budget allows, choosing the higher EMI usually costs much less in total interest. You can ask your bank which option it has applied, and request a change.
Will Rates Rise Further?
Possibly. RBI Governor Sanjay Malhotra said rate cuts are "off the table in the near term", and economists expect a cumulative 75 bps of hikes in this cycle, Business Standard reported. The RBI's September 2026 Survey of Professional Forecasters showed a median end-FY27 repo rate expectation of 5.75%. These are expectations, not certainties.
What Can Borrowers Do Now?
- Check your benchmark. Find out whether your loan is linked to the repo rate (RLLR/EBLR) or MCLR, and your reset date.
- Compare your spread. If your spread is much higher than what banks offer new borrowers, ask for a lower spread or consider a balance transfer, keeping processing fees in mind.
- Prepay if you can. Part-prepayments reduce principal and help offset higher rates. Floating-rate home loans for individuals generally don't carry prepayment penalties.
- Look at the deposit side. Higher rates can also mean better FD returns. See our guide to FD interest rates after the RBI repo rate hike.
Investors tracking lenders can follow GoPocket stock pages for Bank of Baroda, Punjab National Bank, Indian Bank and Bank of India.
Sources
- Business Standard, State-owned banks raise repo-linked lending rates by 25 bps after RBI move, October 8, 2026
- Business Standard, RBI rate hike: ₹50 lakh home loan EMI may rise by ₹817; FDs may offer more, October 7, 2026
- Business Standard, RBI rate cycle: How much did borrowers and savers actually benefit?, October 8, 2026
Disclaimer: This article is for information and educational purposes only and is not financial advice. EMI figures are illustrative; actual rates depend on your bank, benchmark, spread and loan terms. Confirm details with your lender and consult a qualified adviser for decisions about your loan.
