As banks would fully pass the benefits of the rate cut to retail borrowers over a period of time, we should see stronger demand for credit for the next few months.
FinTech BizNews Service
Mumbai, 5 December 2025: The Monetary Policy Committee (MPC) held its 58th meeting from December 3 to 5, 2025, under the chairmanship of Shri Sanjay Malhotra, Governor, Reserve Bank of India. The MPC voted unanimously to reduce the policy repo rate under the liquidity adjustment facility (LAF) to 5.25 per cent. Consequently, the standing deposit facility (SDF) rate shall stand adjusted to 5.00 per cent and the marginal standing facility (MSF) rate and the Bank Rate to 5.50 per cent. The MPC also decided to continue with the neutral stance.
Santosh Agarwal, CEO, Paisabazaar, believes:
"The repo-rate cut would bring more relief to both prospective and existing home loan borrowers. Transmission of the rate cut would be faster for floating rate loans linked to repo rate. Borrowers whose loans are linked to MCLR or other internal benchmarks, may have to wait longer for the transmission as the cost of funds of the banks plays a major role in determining their internal benchmark rates. The date of transmission would depend on the interest reset dates set by their lender. Home loan borrowers generally have the option to reduce their EMI amount or reduce their tenure with the same EMI.
As banks would fully pass the benefits of the rate cut to retail borrowers over a period of time, we should see stronger demand for credit for the next few months. The rate cut should further boost spending and investments from existing borrowers and better the overall liquidity in the system.
The reduced repo-rate and stronger liquidity should also help Banks to reduce interest rates of FDs and other liability-side fund sources further. While this would not impact existing FDs, those planning to make new investments in FDs should try to lock the existing interest rates before rates are trimmed.”
