RBI’s Rate Cut Bonanza: EMIs Fall, Real Estate Eyes Revival

In a major move expected to ease financial pressure on millions, the Reserve Bank of India (RBI) has cut the repo rate by 25 basis points, bringing it down to 5.25%. This marks the fourth rate cut of 2025, totalling 125 basis points, announced by RBI Governor Sanjay Malhotra on December 5.

Rate Cut Aimed at Boosting Growth Amid Stable Inflation

The RBI’s decision comes against the backdrop of stable inflation at 0.25% and a strong GDP growth rate of 8.2%, signalling confidence in India’s economic position.
The central bank said the reduction is aimed at reviving demand and boosting the economy, particularly at a time when global trade continues to face uncertainties.

Banks Respond Quickly With Lending Rate Reductions

Following the announcement, major lenders including Punjab National Bank, Bank of India, and Bank of Baroda lowered their repo-linked lending rates by up to 25 basis points.
This immediate reaction is expected to lift sentiment among homebuyers and retail borrowers, who stand to benefit the most.

Borrowers Set to Save Big as EMIs Decline

The rate cut translates into substantial EMI relief for borrowers.
For example, a ₹50 lakh home loan over 20 years may see monthly EMIs fall by ₹750–₹800, amounting to interest savings of up to ₹9 lakh over the tenure.

Loans linked to the External Benchmark Lending Rate (EBLR) will see the revised rates implemented within 1–3 months.
However, fixed-rate loans will remain unchanged.

Financial experts advise borrowers to continue paying the same EMI amounts to reduce tenure and maximize total savings.

Real Estate Sector Welcomes Boost in Demand

The real estate industry, which has been grappling with affordability challenges, expects a surge in demand, especially in the affordable and mid-income housing segments.
Lower borrowing costs are likely to uplift sectoral growth in the coming months.

Lower Fixed Deposit Returns for Savers

While borrowers celebrate, savers may feel the impact as banks are expected to reduce fixed deposit interest rates in the coming weeks.
Experts say this is an inevitable side effect of the monetary policy easing cycle.

RBI Maintains Neutral Stance Amid Global Uncertainty

Despite the aggressive rate cuts, the RBI maintained a neutral monetary stance, indicating confidence in what it described as India’s “Goldilocks zone”—a state of low inflation and high growth.
However, the central bank cautioned that global economic headwinds remain a risk factor.