RBI’s new rule could reduce your EMI sooner and here’s how...
- Kiran S N
- Nov 7
- 2 min read
The Reserve Bank of India (RBI) has quietly made a rule change that could make a big difference to your monthly EMIs. If you’ve taken a floating-rate home loan, you might soon be able to get a lower interest rate much earlier, especially if your credit score has improved.
What’s changed?
Earlier, when you took a home loan, your bank fixed something called the ‘spread’, the bank’s margin over the benchmark rate (like the repo rate). Even if your credit score got better, the bank couldn’t change this spread for three years after the loan was issued.
But starting October 1, 2025, RBI is giving banks the flexibility to reduce the spread before that three-year lock-in, as long as it’s done fairly and not selectively.
In simple terms, if you’ve been financially disciplined, paid your EMIs on time, reduced unsecured debt, and improved your credit score, your bank can now reward you faster with a lower interest rate.
Why it matters
This change is a big win for existing borrowers. Until now, when interest rates dropped or banks offered better deals, only new customers benefited. Older borrowers often stayed stuck with higher spreads and, therefore, higher EMIs, even if their credit profile had improved.
RBI’s update now levels the playing field. It ensures that rate cuts and credit improvements translate into real savings for everyone, not just new customers.
How can you reduce your EMI?
This new flexibility isn’t automatic; you’ll have to take the first step. Here’s what you can do:
Track and improve your credit score – pay EMIs on time, avoid unnecessary loans, and maintain low credit utilisation.
Ask your bank to reassess your loan’s spread based on your current credit score.
Compare offers from other banks or housing finance companies; having competing offers strengthens your negotiation power.
Evaluate fixed-rate options if you expect interest rates to rise, but be cautious, as fixed rates don’t drop when the market does.
A quick checklist
Before you act, keep these points in mind:
The rule applies only to floating-rate loans linked to external benchmarks (like the Repo/EBLR).
The spread revision is not automatic. You need to initiate it.
Always check switching costs and fees before refinancing.
If you move to a fixed rate, understand that you could be locked in even if rates fall later.
Bottom Line
RBI’s new rule is intended to reward financial discipline. If you’ve been consistent with your payments and kept your credit profile strong, this is your cue to ask your bank the one smart question:
“Can you reassess my home loan spread based on my improved credit score?”
Because sometimes, a single smart ask is all it takes to reduce your EMI
much sooner than before.
Disclaimer: This content is for educational purposes only; please conduct your own research and consult with a qualified investment advisor before making any investment decisions.
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