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The Reserve Bank of India’s latest monetary policy has started bringing relief to borrowers, and Indian Bank is among the first major lenders to reduce its interest rates following the RBI’s repo rate cut. The bank has announced a reduction in its Repo Linked Benchmark Lending Rate (RBLR) as well as the Marginal Cost of Funds-Based Lending Rate (MCLR), bringing direct benefits to customers holding home loans, business loans, and other RBLR-linked credit facilities.

With this revision, the monthly EMI for thousands of customers is expected to decrease, offering respite to borrowers struggling with rising repayment costs over the past year. The updated rates are now effective from December 6, 2025.

Indian Bank Reduces RBLR: EMI to Become Cheaper

The RBI recently reduced the repo rate from 5.50% to 5.25% in an attempt to boost economic growth and stimulate credit demand. In response, Indian Bank has revised its RBLR from 8.20% to 7.95%. Since most loans issued today—especially home loans—are directly linked to repo movements, the cut will immediately lower the effective interest rate for borrowers.

New Updated Rates

The reduction of 25 basis points in RBLR means customers will either pay lower monthly EMIs or may choose to reduce their loan tenure, depending on what their agreement terms allow.

Impact on Borrowers: Who Benefits the Most?

The rate cut will help a wide range of borrowers, including:

• Existing home loan customers whose loans are linked to RBLR or MCLR

• New home buyers seeking cheaper financing options

• Business owners and MSMEs managing capital through bank loans

• Customers under floating interest rate plans

For individuals repaying long-term loans like home loans, even a small reduction in rate can lead to significant long-term savings. For example, a customer with a ₹50-lakh home loan for 20 years may save thousands annually depending on EMI structure.

Example of Potential Savings

If the previous EMI was ₹43,000 at 8.20%, a reduction to 7.95% may bring the EMI down by approximately ₹800–₹1,200 per month, depending on the loan terms. Over a year, that translates to savings of nearly ₹10,000–₹12,000, which is a major relief for middle-class families budgeting for rising expenses.

MCLR-Linked Customers Also Gain Relief

Indian Bank has also revised its 1-year MCLR by 5 basis points, bringing it from 8.85% to 8.80%. Borrowers with loans tied to MCLR will benefit from reduced interest cost on their next reset date. Since most retail loans are linked to the 1-year MCLR, the reduction will positively impact a large segment of customers.

Borrowers Advised to Review Loan Options

The bank has encouraged all customers to visit their nearest branch or access digital banking channels to understand how the new rates impact their EMI. Customers can also request modifications to repayment plans, such as:

• Switching from fixed to floating rates

• Choosing EMI reduction or tenure reduction

• Considering partial payments to reduce loan burden

Boost for Real Estate and Borrowing Demand

Financial experts believe that the rate reduction will support the housing market, encouraging more people to invest in property. Lower EMI burden typically increases affordability and improves buyer confidence. Developers also expect a rise in demand, especially in urban and semi-urban markets.

The rate cut is expected to improve liquidity in the economy, support business expansion, and stimulate capital expenditure in various sectors.

Conclusion

The latest rate cut by Indian Bank marks a significant relief for home loan and business loan borrowers across India. With RBLR reduced to 7.95% and MCLR lowered to 8.80%, customers will see cheaper EMIs and improved financial flexibility. As borrowing becomes more affordable, the move is likely to drive stronger loan demand and broader economic growth.