Following the Reserve Bank of India's (RBI) recent decision to cut the repo rate, Punjab National Bank (PNB) has reduced its home loan interest rate to 8.10% from 8.35%, effective December 6, 2025. This move is expected to lower the burden on homebuyers and potentially reduce their Equated Monthly Installments (EMIs).
RBI's Repo Rate Cut: The Catalyst
On December 5, 2025, the RBI's Monetary Policy Committee (MPC) lowered the repo rate by 25 basis points to 5.25%. The repo rate is the interest rate at which the RBI lends money to commercial banks. This reduction, the fourth of 2025, reflects the central bank's commitment to supporting economic growth amid benign inflation. The reverse repo rate remains unchanged at 3.35%. The Bank Rate and the Marginal Standing Facility (MSF) rate stand at 5.75%. The Standing Deposit Facility Rate is 5.25%.
RBI Governor Sanjay Malhotra stated that the MPC voted unanimously to reduce the repo rate by 25 basis points to 5.25% and to maintain a neutral stance. The central bank projects a real GDP growth of 7.3% for fiscal year 2026 and CPI inflation at 2%.
PNB's Response and Impact on Homebuyers
PNB's decision to reduce its Repo Linked Lending Rate (RLLR) is a direct consequence of the RBI's policy move. The bank has revised its RLLR from 8.35% (including a 10 basis point BSP) to 8.10% (including a 10 basis point BSP). However, the Marginal Cost of Lending Rate (MCLR) and Base Rate of PNB remain unchanged.
For existing PNB customers with home loans linked to the RLLR, this rate cut will translate into lower EMIs. The actual reduction in EMI will depend on the loan amount, outstanding tenure, and the spread charged by the bank. It has been estimated that the lower interest rates could save borrowers ₹5,000-₹6,000 per month on a ₹50 lakh loan over 20 years.
For example, a borrower with a ₹50 lakh home loan at an 8.50% interest rate for 20 years could see their EMI reduce by approximately ₹750–₹1,000 per month with a 0.25% rate cut. This can lead to substantial long-term savings. Some experts suggest that for a ₹50 lakh home loan over 20 years, the cumulative 125 basis point reduction in 2025 could result in a reduction of around ₹9 lakh in total lifetime interest.
Other Banks Follow Suit
Other public sector banks have also responded to the RBI's rate cut by reducing their lending rates. Indian Bank has reduced its repo-linked benchmark lending rate from 8.20% to 7.95%, effective December 6, 2025. Bank of India has also trimmed its Repo-Based Lending Rate (RBLR) by 25 basis points to 8.10%, effective December 5, 2025.
Expert Opinions and Market Impact
Experts believe that the RBI's rate cut will make home loans more affordable, stimulate demand in the real estate sector, and boost economic activity. Rajat Bokolia, CEO of Newstone, noted that the rate reduction increases borrowers' purchasing power by lowering EMIs and encourages real estate demand, directly benefiting developers through cheaper financing and faster sales.
On December 6, 2025, PNB shares closed up ₹2.15 at ₹121.70, reflecting strengthened investor confidence.
