As the Reserve Bank of India (RBI), the country’s top monetary authority, made a bold move to reinvent the monetary policy framework, it decided to lower the repo rate by 25 basis points, thus making it an astounding low of 5.25% in December 2025. The decision of the RBI was guided by the current inflation rate, the economic growth, and the liquidity in the market as factors. Consequently, the main objective is to make the cost of loans lower so that there is an increase in the circulation of money in the economy. In this regard, the leading banks have also responded by lowering their loan-rate benchmarks. As a result, this will offer the consumers who are taking loans for houses, vehicles, and other needs, more favorable conditions.
The Banks That Cut Rates and the Extent of the Cuts
The reduction of rates is now effective as the banks are decreasing their lending rates. Here are some of them:
- Punjab National Bank (PNB) has cut down its repo-linked lending rate (RLLR) by 0.25% from 8.35% to 8.10% effective December 6, 2025.
- Bank of Baroda (BoB) has reduced its benchmark retail loan rate (BRLLR) from 8.15% to 7.90%.
- Indian Bank has reduced its RLLR from 8.20% to 7.95%.
- Bank of India (BoI) has cut its repo-based lending rate (RBLR) by 25 basis points from 8.35% to 8.10%, effective 5 December 2025.
- The private sector banker HDFC Bank has also reduced its MCLR by a few basis points and the new rates depend upon the period of loan and range from 8.30%-8.55%.
In addition, alongside the public sector banks, the private sector banks and the smaller lenders have also decreased the rates on mortgage, auto, and retail loans.
What This Means for Borrowers — Lower EMIs, Cheaper Loans
The rate cuts are good news for borrowers with floating-rate loans, especially when these loans are based on benchmarks like RLLR, RBLR, or MCLR, as lowering the rates gives them the option to pay less or even pay off their loan faster. Among the foremost winners, home loan borrowers are expected to be the largest group since a number of banks are already providing cheaper rates mainly due to the RBI policy change.
New customers might consider this the right time for taking out home or auto loans, as the low rates would mean that the total amount to be paid for borrowing is less. Even those who have already availed of the loans could be lucky but only if their borrowing agreements are such that interest rates can be reset or re-calculation linked to benchmark rates can be done.
Things to Watch: Benchmark Type and Reset Dates
The amount gained from rate cuts is determined by the kind of loan agreement. Loans tied to external benchmarks (such as RLLR / RBLR) usually experience the fastest and automatic rate adjustments. Loans based on older, fixed benchmarks may not see immediate reductions—their benefit depends on when the next reset date arrives. Borrowers should check their loan documents or contact their bank to find out when the new rate will apply.
Overall Impact — Relieving Borrowers, Boosting Demand
The recent cuts in interest rates have provided substantial relief to borrowers who have already been struggling with high EMIs during the tough living cost era. The demand for real estate and consumer markets could be boosted and thus the economic activity could be stimulated by the cheaper home and auto loans. Lower EMIs also result in higher disposable income, thus in a better management of household monthly expenses. For many borrowers, the new rates coming into effect could mean a much-sought-after financial breathing space.
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