After the Reserve Bank of India (RBI) reduced the repo rate by 25 basis points to 5.25% on December 5, 2025, several leading banks have started passing on the benefit to customers by lowering their lending benchmarks. These changes are beginning to reflect across home loans linked to repo-based benchmarks as well as internal benchmarks like MCLR, offering relief to both existing and prospective borrowers.<\/p>\r\n
For home loan customers, the impact of the rate cut can be seen either in the form of lower monthly EMIs or a reduction in the overall loan tenure, depending on how individual banks apply interest rate resets. While the cut may seem small on paper, even a 25 bps reduction can translate into substantial savings over long loan tenures, especially for large-ticket home loans.<\/p>\r\n
The repo rate is the interest rate at which the RBI lends short-term funds to commercial banks. It acts as a key monetary policy tool used to control liquidity, inflation, and economic growth. When the RBI cuts the repo rate, borrowing becomes cheaper for banks, encouraging them to lend more and stimulate economic activity.<\/p>\r\n
In recent years, the RBI has pushed banks to link most retail loans\u2014especially home loans\u2014to external benchmarks such as the repo rate. This move was aimed at ensuring faster and more transparent transmission of policy rate changes to end borrowers, compared to the earlier system, where rate changes were slow and opaque.<\/p>\r\n
The December 2025 repo rate cut was driven by:<\/p>\r\n
While the RBI announces a policy rate cut, the actual benefit to borrowers depends on how banks transmit the change. This transmission occurs through lending benchmarks such as:<\/p>\r\n
Borrowers linked to repo-based benchmarks usually experience quicker relief, whereas those on MCLR-linked loans must wait until their scheduled reset date.<\/p>\r\n
Since the December repo rate decision, several major lenders have announced reductions in their lending benchmarks. Below is a consolidated view of the banks that have passed on the benefit so far.<\/p>\r\n
| \r\n Bank<\/strong><\/p>\r\n<\/td>\r\n Benchmark Reduced<\/strong><\/p>\r\n<\/td>\r\n New Rate (Reported)<\/strong><\/p>\r\n<\/td>\r\n Effective Date \/ Notes<\/strong><\/p>\r\n<\/td>\r\n<\/tr>\r\n HDFC Bank<\/p>\r\n<\/td>\r\n MCLR<\/p>\r\n<\/td>\r\n 8.30%\u20138.55% (tenure-based)<\/p>\r\n<\/td>\r\n Cut up to 5 bps; benefit on reset date<\/p>\r\n<\/td>\r\n<\/tr>\r\n Punjab National Bank (PNB)<\/p>\r\n<\/td>\r\n RLLR<\/p>\r\n<\/td>\r\n 8.10% (incl. BSP of 10 bps)<\/p>\r\n<\/td>\r\n Effective Dec 6, 2025<\/p>\r\n<\/td>\r\n<\/tr>\r\n Bank of Baroda<\/p>\r\n<\/td>\r\n BRLLR<\/p>\r\n<\/td>\r\n 7.90%<\/p>\r\n<\/td>\r\n Reduced from 8.15%<\/p>\r\n<\/td>\r\n<\/tr>\r\n Indian Bank<\/p>\r\n<\/td>\r\n RLLR<\/p>\r\n<\/td>\r\n 7.95%<\/p>\r\n<\/td>\r\n Effective Dec 6, 2025<\/p>\r\n<\/td>\r\n<\/tr>\r\n Bank of India<\/p>\r\n<\/td>\r\n RBLR<\/p>\r\n<\/td>\r\n 8.10%<\/p>\r\n<\/td>\r\n Effective Dec 5, 2025<\/p>\r\n<\/td>\r\n<\/tr>\r\n Bank of Maharashtra<\/p>\r\n<\/td>\r\n Home loan rate<\/p>\r\n<\/td>\r\n 7.10%<\/p>\r\n<\/td>\r\n Cut from 7.35%; processing fee waiver announced<\/p>\r\n<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n <\/p>\r\n Rates are indicative and may vary based on credit score, loan amount, tenure, and borrower category.<\/i> A common question among borrowers is why EMI reductions appear immediately for some, while others see no change for months. The answer lies in the benchmark linkage of the loan.<\/p>\r\n This difference explains why two borrowers at the same bank may experience different timelines for EMI relief despite the same repo rate cut.<\/p>\r\n Even a small reduction in interest rates can significantly lower the total cost of borrowing over long tenures.<\/p>\r\n <\/p>\r\n |