Explanation – When the RBI keeps the repo rate unchanged, it signifies that the central bank is maintaining its current stance on monetary policy. This decision can lead to stability in interest rates for existing loans, resulting in no immediate changes to the EMIs that borrowers are currently paying. Borrowers continue to pay the same EMIs as before, providing them with stability in their repayment obligations. If the Reserve Bank of India (RBI) increases the repo rate, banks may raise their lending rates, which can lead to an increase in the interest rate on floating-rate loans. This, in turn, can result in higher EMIs for borrowers, as the cost of borrowing increases. However, for loans with a fixed interest rate, the interest rate remains constant throughout the loan tenure, regardless of changes in the market interest rates or the repo rate.

Source: The Hindu