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Every two months, six people sit in a room in Mumbai and decide something that touches your home loan, your fixed deposit, your debt mutual fund, and indirectly your equity SIP. That room is the RBI’s Monetary Policy Committee.
Most people skip the news when MPC meets. Big mistake.
What the MPC actually decides
Here’s what the MPC actually decides. They set the repo rate, which is the rate at which RBI lends to commercial banks. When repo goes up, your bank’s cost of funds goes up, and they pass it on. When it goes down, the reverse. Sounds simple. The catch is the lag.
Repo rate to home loan EMI: the transmission lag
If RBI cuts repo today, your home loan EMI doesn’t drop tomorrow. Banks adjust their MCLR or external benchmark rates with their own timing. For external benchmark loans like the ones tied to repo, the change shows up in three months. For older MCLR loans, it can take six months or more. That gap matters because it’s where banks protect their margins at your expense.
FD rates: the inverse relationship
FD rates work the inverse way. When repo rises, FDs become more attractive. When repo falls, FD rates drop, sometimes faster than your loan rates do. Banks aren’t your friends here. They’re businesses.
Debt mutual funds react instantly. When rates fall, bond prices rise, and your debt fund NAV jumps. When rates rise, the opposite. This is why duration funds did well in the rate-cutting cycle from 2024 to early 2026, and why they’ll struggle from here. RBI has signaled that rate cuts are largely done.
For your equity SIP, the link is indirect but real. Lower rates mean cheaper money for businesses, which boosts earnings, which lifts equity. Higher rates do the reverse. But equity reacts to expectations, not just decisions. By the time RBI announces, the market has usually moved.
Why your debt fund moves on MPC day
Here’s how to use MPC days going forward. If you have a floating home loan, pay attention to whether your bank actually transmits the cut. If it doesn’t, that’s worth a conversation. If you’re sitting on a debt fund decision, MPC tells you which categories to favor. And if you’re tempted to time your SIP around it, don’t. The discipline matters more than the calendar.
SIP behaviour during rate cycles
The next MPC is on the calendar. It’s worth ten minutes of your attention.
