Many borrowers who took home loans at about 7% found that after rate hikes, their bank kept the EMI the same and quietly extended the tenure - sometimes by 10 years or more.
How bad can it get?
A ₹50 lakh, 20-year loan at 7.4% has an EMI of about ₹39,974. If the rate rises to 8.75% and the EMI stays the same, the loan stretches to about 28 years - eight extra years of payments.
What RBI requires at a reset
Under RBI's framework for floating-rate loans (2023), lenders must:
- Tell you clearly when the rate changes and how it affects your EMI and tenure.
- Give you the choice at reset: increase the EMI, extend the tenure (within limits, e.g. not beyond your repayment capacity or age limits), or a mix.
- Let you switch to a fixed rate (as per the lender's policy and charges).
- Let you prepay in part or full at any time.
- Send a quarterly statement showing principal and interest paid, EMIs left and the rate.
What to do
- Check your statement - remaining tenure and the current rate.
- Ask your bank for your spread over the benchmark (e.g. repo + spread). Older loans on MCLR or base rate often carry a higher effective rate - ask to move to the current external benchmark (EBLR) with a lower spread; there may be a conversion fee.
- Choose a higher EMI to bring the tenure back down, if your budget allows.
- Prepay whenever you can, asking to reduce tenure.
- Compare a balance transfer if your spread is much higher than what new borrowers get.
See your options - enter your loan and get the EMI needed to finish on time, and what a reprice or transfer saves.