Published on December 22, 2025 | By LoanPao Team
The Reserve Bank of India (RBI) reduced its repo rate by 25 basis points to 5.25% in its December 2025 monetary policy review. This is the fourth rate cut in 2025, totaling a 125 bps reduction. The move aims to boost economic growth while keeping inflation in check. As a result, several major banks have passed on the benefits by cutting their lending rates, leading to lower EMIs for borrowers with floating-rate loans.
This is particularly good news for home loan borrowers, as many loans are linked to external benchmarks like EBLR (External Benchmark Linked Rate) or RLLR (Repo-Linked Lending Rate). For personal loans, business loans, and other floating-rate products, EMIs are set to decrease as well.
Why Banks Are Cutting Rates
Banks' funding costs have decreased due to the RBI cuts. With inflation under control (around 4-5%) and GDP growth stable, banks are incentivized to lend more aggressively. This benefits borrowers directly through lower interest rates and reduced monthly payments.
Key factors driving the cuts:
- Lower repo rate transmission to banks' marginal cost of funds.
- Competition among banks to capture more market share in retail lending.
- Government push for affordable housing and economic recovery.
Bank-Wise Lending Rate Reductions (December 2025)
| Bank Name | Rate Reduced | Effective Date | Current Rate (EBLR/RLLR) | Reduction Amount |
|---|---|---|---|---|
| State Bank of India (SBI) | EBLR & RLLR | December 15, 2025 | EBLR: 7.90%, RLLR: 7.50% + CRP | 25 bps |
| Bank of Baroda | BRLLR | December 6, 2025 | 7.90% | 25 bps |
| Punjab National Bank (PNB) | RLLR | December 6, 2025 | 8.10% | 25 bps |
| Canara Bank | RLLR | December 12, 2025 | 8.00% | 25 bps |
| Indian Overseas Bank (IOB) | RLLR | December 15, 2025 | 8.10% | 25 bps |
| HDFC Bank | Select Tenures | December 2025 | Varies | Up to 5 bps |
| Bank of Maharashtra | Home & Car Loans | December 2025 | Home: 7.10%, Car: 7.45% | 25-30 bps |
Note: MCLR-linked loans may see delayed or partial transmission compared to repo-linked ones.
Impact on EMIs: Real Examples
For a typical ₹50 lakh home loan with 20-year tenure:
- At 8.50% interest: EMI ≈ ₹43,391
- After 25 bps cut (to 8.25%): EMI ≈ ₹42,372 (saving ₹1,019/month)
- After 50 bps cut (to 8.00%): EMI ≈ ₹41,366 (saving ₹2,025/month)
Total savings over 20 years: ₹2.4 lakh to ₹4.8 lakh (approx.). Borrowers can opt to reduce EMI or shorten tenure.
What Borrowers Should Do Now
To maximize benefits:
- Check your loan type (repo-linked vs. MCLR) and current rate.
- Calculate potential savings using LoanPao's EMI calculator.
- Consider balance transfer if your current bank hasn't passed on the cut fully.
- Improve your CIBIL score (free check on LoanPao) for better negotiation.
- Apply for new loans or refinance at lower rates via LoanPao.
Future Outlook
With more RBI cuts expected in 2026, lending rates could fall further. This is an ideal time for home buyers in Delhi NCR and across India to lock in low rates. Stay updated with LoanPao for the latest offers and expert advice.
At LoanPao, we connect you with the best banks for instant approvals and competitive rates. Apply today to benefit from these reductions!