RBI cuts repo rate to 5.25%: Banks move swiftly to trim lending rates; details here
The latest reduction is expected to provide a meaningful boost to interest-sensitive sectors, especially real estate, where lower mortgage rates often trigger a surge in home-buying activity. Borrowers with floating-rate home loans are likely to see lower EMIs once banks adjust their benchmark-linked lending rates.
- Dec 6, 2025,
- Updated Dec 6, 2025 10:45 AM IST
In a significant shift in its monetary policy stance, the Reserve Bank of India (RBI) on Friday lowered the policy repo rate by 25 basis points to 5.25%, marking its fourth rate reduction this year. The move signals the central bank’s growing confidence in easing inflationary pressures and its intent to support growth as economic momentum strengthens heading into 2026.
Announcing the decision at the end of the three-day Monetary Policy Committee (MPC) meeting held from December 3 to 5, RBI Governor Sanjay Malhotra said the panel had unanimously agreed on the rate cut after evaluating macroeconomic trends and inflation expectations. “After a detailed assessment of the evolving macroeconomic conditions and the outlook, the MPC voted unanimously to reduce the policy repo rate by 25 basis points to 5.25% with immediate effect,” Malhotra said.
The repo rate — the rate at which banks borrow funds from the RBI — acts as a critical lever in managing inflation and liquidity. When inflation rises, the central bank raises the repo rate to make borrowing costlier for financial institutions; conversely, cuts in the repo rate typically ease liquidity conditions and reduce borrowing costs for consumers.
The latest reduction is expected to provide a meaningful boost to interest-sensitive sectors, especially real estate, where lower mortgage rates often trigger a surge in home-buying activity. Borrowers with floating-rate home loans are likely to see lower EMIs once banks adjust their benchmark-linked lending rates. However, fixed-rate loans, such as many car and personal loans, will remain unaffected as they do not respond to repo-linked movements.
With lenders having already adjusted rates several times this year, expectations are high that the latest cut will be passed on swiftly. Most new home loans today are tied to external benchmark lending rates, ensuring quicker transmission of monetary policy changes.
State-owned banks were among the first to act following the RBI’s announcement.
Indian Bank revised its Repo Linked Benchmark Lending Rate (RBLR) to 7.95% from 8.20%, effective December 6. The bank said the adjustment reflects the 25 bps reduction in the RBI’s policy rate, while other benchmark-linked rates remain unchanged.
Bank of India also reduced its Repo Based Lending Rate to 8.10% from 8.35%, with the revised rate taking effect on December 5. The markup component of 2.85% remains intact, the bank said in its regulatory filing.
Following suit, Bank of Baroda lowered its Baroda Repo Based Lending Rate (BRLLR) by 25 basis points—from 8.15% to 7.90%—effective December 6. The change was disclosed in a stock exchange filing, which also noted that the markup component remained unchanged.
The rate adjustments came shortly after the RBI revised India’s FY26 GDP growth forecast upward to 7.3%, citing strong rural demand, improving urban consumption, and rising private-sector activity. The central bank said the rate cut aims to reinforce growth momentum while maintaining price stability.
How real estate is reacting to repo cut
Ashish Narain Agarwal, Founder & MD, PropertyPistol, said: “The RBI’s decision to bring the repo rate down to 5.25% is a welcome relief for homebuyers, particularly in high-cost cities like Mumbai where affordability remains the biggest hurdle. A 25-basis-point cut can trim EMIs on a Rs 50-lakh loan by around Rs 750–Rs 800 over a 20-year term, which often provides the confidence boost many salaried customers need to move forward. But the real advantage of this rate cut will depend on how borrowers respond. Those already servicing loans can save significantly on total interest by keeping EMIs unchanged and letting the tenure shorten, since more of each instalment will then go toward the principal. If lenders do not transmit the rate cut within one to three billing cycles, refinancing becomes a practical option. New buyers, meanwhile, should pair the improved affordability with careful financial planning."
Vishal Raheja, Founder & MD, InvestoXpert Advisors, said: “The RBI’s rate reduction is likely to boost confidence among both end-users and investors, particularly in lifestyle-driven and fast-growing markets such as Goa, Bengaluru and Delhi-NCR. While the percentage change seems modest, the absolute savings are meaningful — a 25-bps cut lowers the EMI on a ₹60-lakh loan by roughly Rs 900–Rs 1,200 per month, amounting to over Rs 10,000 a year if the full benefit is passed on. This added financial cushion enhances the viability of second homes, investment units and plotted developments, especially in premium areas with strong amenities. Beyond lowering borrowing costs, the softer rate environment improves expected rental yields and strengthens exit prospects for investors with a two-to-four-year horizon."
In a significant shift in its monetary policy stance, the Reserve Bank of India (RBI) on Friday lowered the policy repo rate by 25 basis points to 5.25%, marking its fourth rate reduction this year. The move signals the central bank’s growing confidence in easing inflationary pressures and its intent to support growth as economic momentum strengthens heading into 2026.
Announcing the decision at the end of the three-day Monetary Policy Committee (MPC) meeting held from December 3 to 5, RBI Governor Sanjay Malhotra said the panel had unanimously agreed on the rate cut after evaluating macroeconomic trends and inflation expectations. “After a detailed assessment of the evolving macroeconomic conditions and the outlook, the MPC voted unanimously to reduce the policy repo rate by 25 basis points to 5.25% with immediate effect,” Malhotra said.
The repo rate — the rate at which banks borrow funds from the RBI — acts as a critical lever in managing inflation and liquidity. When inflation rises, the central bank raises the repo rate to make borrowing costlier for financial institutions; conversely, cuts in the repo rate typically ease liquidity conditions and reduce borrowing costs for consumers.
The latest reduction is expected to provide a meaningful boost to interest-sensitive sectors, especially real estate, where lower mortgage rates often trigger a surge in home-buying activity. Borrowers with floating-rate home loans are likely to see lower EMIs once banks adjust their benchmark-linked lending rates. However, fixed-rate loans, such as many car and personal loans, will remain unaffected as they do not respond to repo-linked movements.
With lenders having already adjusted rates several times this year, expectations are high that the latest cut will be passed on swiftly. Most new home loans today are tied to external benchmark lending rates, ensuring quicker transmission of monetary policy changes.
State-owned banks were among the first to act following the RBI’s announcement.
Indian Bank revised its Repo Linked Benchmark Lending Rate (RBLR) to 7.95% from 8.20%, effective December 6. The bank said the adjustment reflects the 25 bps reduction in the RBI’s policy rate, while other benchmark-linked rates remain unchanged.
Bank of India also reduced its Repo Based Lending Rate to 8.10% from 8.35%, with the revised rate taking effect on December 5. The markup component of 2.85% remains intact, the bank said in its regulatory filing.
Following suit, Bank of Baroda lowered its Baroda Repo Based Lending Rate (BRLLR) by 25 basis points—from 8.15% to 7.90%—effective December 6. The change was disclosed in a stock exchange filing, which also noted that the markup component remained unchanged.
The rate adjustments came shortly after the RBI revised India’s FY26 GDP growth forecast upward to 7.3%, citing strong rural demand, improving urban consumption, and rising private-sector activity. The central bank said the rate cut aims to reinforce growth momentum while maintaining price stability.
How real estate is reacting to repo cut
Ashish Narain Agarwal, Founder & MD, PropertyPistol, said: “The RBI’s decision to bring the repo rate down to 5.25% is a welcome relief for homebuyers, particularly in high-cost cities like Mumbai where affordability remains the biggest hurdle. A 25-basis-point cut can trim EMIs on a Rs 50-lakh loan by around Rs 750–Rs 800 over a 20-year term, which often provides the confidence boost many salaried customers need to move forward. But the real advantage of this rate cut will depend on how borrowers respond. Those already servicing loans can save significantly on total interest by keeping EMIs unchanged and letting the tenure shorten, since more of each instalment will then go toward the principal. If lenders do not transmit the rate cut within one to three billing cycles, refinancing becomes a practical option. New buyers, meanwhile, should pair the improved affordability with careful financial planning."
Vishal Raheja, Founder & MD, InvestoXpert Advisors, said: “The RBI’s rate reduction is likely to boost confidence among both end-users and investors, particularly in lifestyle-driven and fast-growing markets such as Goa, Bengaluru and Delhi-NCR. While the percentage change seems modest, the absolute savings are meaningful — a 25-bps cut lowers the EMI on a ₹60-lakh loan by roughly Rs 900–Rs 1,200 per month, amounting to over Rs 10,000 a year if the full benefit is passed on. This added financial cushion enhances the viability of second homes, investment units and plotted developments, especially in premium areas with strong amenities. Beyond lowering borrowing costs, the softer rate environment improves expected rental yields and strengthens exit prospects for investors with a two-to-four-year horizon."