Home loan relief after RBI move: HDFC Bank, PNB, BoB and others cut rates

Home loan EMIs are set to ease in the coming weeks as major banks begin reducing lending rates following the RBI’s 25-basis-point cut in the policy repo rate to 5.25% on December 5. Both public and private lenders have started passing on the benefit, improving prospects for existing and prospective borrowers.

Why rates are dropping

A significant share of retail lending -particularly home loans - is linked to external benchmarks like the repo rate or internal ones such as MCLR. When the central bank lowers its policy rate, banks usually revise these benchmarks downward as well.

Existing borrowers may see the impact in two ways:

EMIs could fall while loan tenure stays the same, or

The tenure could shorten while EMIs remain unchanged.

The extent of relief depends on the loan’s benchmark (RLLR, RBLR or MCLR) and the borrower’s reset cycle.

Banks begin trimming rates

HDFC Bank has cut its MCLR by up to 5 basis points across durations, bringing it to a range of 8.30%–8.55%, slightly below the previous 8.35%–8.60%. Customers with MCLR-linked loans will notice the change at their next reset. Punjab National Bank has lowered its repo-linked lending rate to 8.10% from 8.35%, effective December 6, automatically benefiting borrowers tied to that benchmark. Bank of Baroda has reduced its retail benchmark rate to 7.90%, down from 8.15%, offering marginal relief on home and other consumer loans.

Indian Bank and Bank of India have also adjusted their repo-linked rates to 7.95% and 8.10% respectively, following the RBI’s rate cut. The steepest cut so far has come from Bank of Maharashtra, which has dropped its home loan rate to 7.10% from 7.35%. It has also lowered car loan rates to 7.45% and scrapped processing fees, reducing upfront costs for new borrowers.

What borrowers should consider

Homeowners on floating-rate loans should check their upcoming reset date and verify which benchmark their loan follows. Fresh borrowers may want to compare offers across banks, as differences in spreads and fees can significantly influence total borrowing costs.