Borrowers Get Major Relief as Banks Cut Lending Rates, EMIs Likely to Ease

Borrowers across India have reason to feel optimistic as several public sector banks announced lending rate cuts following the Reserve Bank of India’s latest monetary policy decision. 

After the RBI reduced the repo rate by 25 basis points in its Monetary Policy Committee Resolution dated December 6, 2025, banks began passing on the benefit to customers with loans linked to external benchmarks. This move is expected to support EMI reduction for home, auto and personal loan borrowers at a time when inflation pressures are moderating and credit demand remains steady.

According to the RBI’s Resolution of the Monetary Policy Committee, December 2025, available on the RBI website under Monetary Policy → MPC Resolutions, the decision was taken to support economic growth while keeping inflation within the mandated tolerance band. 

Similar trends were highlighted by LoansJagat in its report “Good Days For Home Loan Borrowers: EMIs To Drop Further After RBI Cuts Repo Rate”, published on December 2025, which noted that faster rate transmission by banks could further soften borrowing costs

Lending Rates Revised, Direct Impact on EMIs

Several major lenders moved quickly after the RBI announcement. Canara Bank cut its Repo Linked Benchmark Lending Rate by 25 basis points to 8 percent from 8.25 percent, effective December 12, 2025, aligning fully with the repo rate cut. Existing borrowers with RLLR-linked loans are expected to benefit through lower EMIs or shorter tenures, depending on loan terms.

Punjab National Bank reduced its Repo Linked Lending Rate from 8.35 percent to 8.10 percent, inclusive of a 10 basis point spread, effective December 6, 2025, as reported by The Economic Times in its coverage on banks lowering lending rates.

Read More – Best Time for You to Apply for Loans: Interest Rates to Stay Low for ‘Long Period’

Indian Overseas Bank revised its RLLR to 8.10 percent with effect from December 15, 2025. The bank’s one-year MCLR stands at 8.80 percent, while the three-year MCLR is 8.85 percent, according to its regulatory disclosure.

State Bank of India announced a 25 basis point cut across both its External Benchmark Lending Rate and Repo Linked Lending Rate from December 15, 2025. SBI’s EBLR now stands at 7.90 percent plus Credit Risk Premium and Bank Spread, while its RLLR has been reduced to 7.50 percent plus CRP, a move expected to translate into tangible EMI reduction for eligible borrowers.

Snapshot of Major Lending Rate Cuts

Earlier Developments That Led to the Rate Transmission

The current round of rate cuts builds on the RBI’s earlier guidance signalling a softer interest rate cycle. In its Monetary Policy Statement released on December 6, 2025, the central bank highlighted easing inflation trends and stable growth indicators, paving the way for policy easing.

Bank of Baroda informed stock exchanges through a BSE filing that its Baroda Repo Linked Lending Rate would fall from 8.15 percent to 7.90 percent, effective December 6, 2025, a move covered by Financial Express.

Indian Bank also announced a reduction in its RLLR from 8.20 percent to 7.95 percent, applicable across its assets portfolio from December 6, 2025, as per its official press release.

Bank of India revised its Repo Based Lending Rate to 8.10 percent from 8.35 percent, effective December 5, 2025. In its BSE notification, the bank stated that the revision followed “the downward revision in the repo rate announced by the RBI in its monetary policy meeting,” a development reported by NDTV Profit.

Bank of Maharashtra took a borrower-friendly approach by reducing home loan rates from 7.35 percent to 7.10 percentand car loan rates from 7.70 percent to 7.45 percent, while also waiving processing fees. This update was shared by the bank via a post on X and later reported by India Today.

Also Read – LIC Housing Finance Lowers Home Loan Interest Rates To 7.15% Following RBI Repo Rate Cut

Retail Loan Rate Changes at a Glance