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India’s home loan market has entered a more affordable phase as three major public sector banks have announced significant reductions in lending rates following the Reserve Bank of India’s latest monetary policy decision. On December 5, the RBI lowered the repo rate from 5.50% to 5.25%, prompting banks to revise their lending benchmarks and offer cheaper home loans to millions of borrowers.

This move is expected to bring substantial relief to existing and new home loan customers, especially those whose loans are linked to the Repo Linked Lending Rate (RLLR) or Repo-Based Lending Rate (RBLR). Here’s a detailed breakdown of the latest rate cuts and what they mean for borrowers.

PNB, Bank of India, and Indian Bank Announce Rate Cuts

Following the RBI’s policy announcement, several banks immediately adjusted their lending benchmarks. Punjab National Bank (PNB) was among the first to notify customers about its revised RLLR. The bank reduced its Repo Linked Lending Rate from 8.35% to 8.10%, effective December 6, 2025. While PNB has revised its RLLR, the bank clarified that it has not made any changes to its MCLR or Base Rate at this time.

Bank of India (BOI) followed suit by cutting its Repo-Based Lending Rate (RBLR) by 25 basis points. The rate has now dropped from 8.35% to 8.10%, effective December 5, 2025. According to the bank, the rate cut reflects the RBI’s accommodative stance and is expected to reduce the monthly EMI burden for customers whose loans are directly linked to the repo rate. Borrowers with home loans, car loans, and MSME loans tied to RBLR are expected to benefit the most.

Indian Bank has also reduced its lending rates, making home loans more affordable for its customers. The bank lowered its Repo Linked Benchmark Lending Rate (RBLR) from 8.20% to 7.95%, effective December 6, 2025. Additionally, the bank has reduced its MCLR by 5 basis points, further easing borrowing costs for customers whose loans are linked to the MCLR framework.

How Will These Changes Affect Your EMI?

The rate cuts are particularly beneficial for borrowers whose loans are tied to repo-linked benchmarks. If your home loan is linked to the RLLR or RBLR, the reduced rates will reflect in your EMI calculations during the next reset period. Depending on your bank’s loan agreement, this may lead to one of two outcomes:

• Your EMI amount may decrease, reducing your monthly outflow.

• Your loan tenure may shorten, keeping your EMI the same but helping you close the loan sooner.

However, borrowers with loans linked to older systems such as MCLR or Base Rate may not see immediate relief. Since several banks, including PNB, have not revised MCLR or Base Rate figures, the impact on such borrowers will be minimal until further adjustments are announced.

Why the Rate Cuts Matter

Lower home loan interest rates can significantly improve affordability for homebuyers, especially those planning long-term investments. A small reduction in the repo-linked rate can translate into substantial savings over the loan tenure. These cuts also reflect a broader trend of monetary easing, aimed at boosting credit demand and supporting economic growth.

With three major public sector banks revising their lending rates, more banks are expected to follow, creating a competitive environment that benefits borrowers. For millions of existing loan customers, this move is likely to reduce financial stress, while for new buyers, this may be an ideal time to apply for home loans.