Indian Bank has announced a cut in its lending rates following the Reserve Bank of India's (RBI) decision to reduce the repo rate to 5.25%. The RBI's Monetary Policy Committee (MPC), after meeting from December 3 to 5, voted unanimously to lower the repo rate by 25 basis points. This is the fourth rate reduction this year.
RBI Governor Sanjay Malhotra stated that the decision to cut the repo rate was made after a thorough evaluation of macroeconomic conditions and inflation expectations. The repo rate, which is the rate at which banks borrow funds from the RBI, is a crucial tool for managing inflation and liquidity in the economy. Along with the repo rate cut, the Standing Deposit Facility (SDF) rate has been reduced to 5%, while the Marginal Standing Facility (MSF) and bank rate remain at 5.5%. The RBI has also affirmed its commitment to maintaining sufficient liquidity in the banking system. To that end, the central bank will conduct open market purchases of government securities worth ₹1 trillion in December and execute a three-year dollar-rupee buy-sell swap of $5 billion to inject further liquidity into the system.
The reduction in the repo rate is expected to lower borrowing costs for individuals and corporations. When the repo rate decreases, banks pay less interest to borrow from the RBI, which enables them to reduce lending rates, including the Marginal Cost of Funds-based Lending Rate (MCLR) and base rate. Earlier this week, prior to the RBI announcement, Indian Bank had already lowered its one-year MCLR by 5 basis points to 8.80%, effective December 3. Following the RBI's announcement, Bank of Baroda and Bank of India also reduced their repo-linked loan rates by 25 basis points. Bank of India lowered its Repo Based Lending Rate (RBLR) from 8.35% to 8.10%. Bank of Baroda confirmed that its Baroda Repo Linked Lending Rate (BRLLR) would decrease from 8.15% to 7.90%, starting December 6.
The rate cut is expected to make various loans more affordable, including home loans, auto loans, and business credit. Lower interest costs can reduce Equated Monthly Installments (EMIs), encouraging borrowing and stimulating overall economic growth. Experts estimate that a 25-basis-point rate cut could reduce EMIs on a ₹50 lakh loan by approximately ₹750–₹800 over a 20-year term.
The RBI’s decision to cut the repo rate has been welcomed by the real estate sector. Anuj Puri, Chairman of ANAROCK Group, said that the rate cut is a positive move, especially when housing prices have risen sharply. Rajat Khandelwal, Group CEO of Tribeca Developers, believes the cut will ease pressure on homebuyers in high-priced markets. Lower borrowing costs improve financial predictability and strengthen buyer confidence.
However, some concerns have been raised regarding the depreciation of the rupee, which could make imported building materials more expensive for developers. Despite this challenge, the rate cut is expected to boost affordability for homebuyers, leading to stronger demand and improved confidence in the real estate sector.
SBI Research hailed the RBI's decision as "exceptional," noting that such a move is rare when the economy is growing strongly and inflation is exceptionally low. India's GDP expanded by 8.2% in the July–September 2025 quarter, and inflation slipped to 0.25% in October. The central bank anticipates continued growth and low inflation, although external factors pose potential risks. The RBI has revised its inflation forecast for 2025–26 to 2.0%, down from 2.6% in October and 4.2% in February.
