After RBI's cut, PNB lowers repo-linked rates by 25 bps. Will EMIs soften?

With repo-linked rates easing, borrowers may see lighter EMIs in the next cycle

State-owned Punjab National Bank (PNB) has reduced its repo-linked lending rate (RLLR) by 25 basis points, following the Reserve Bank of India’s (RBI) policy rate cut announced on Friday. The revision, effective immediately, brings PNB’s RLLR down from 8.35 per cent to 8.10 per cent, including the bank’s spread.

 

Why has PNB cut rates now?

The rate action comes a day after the RBI’s monetary policy committee (MPC) voted unanimously to lower the repo rate by 25 basis points to 5.25 per cent while maintaining a neutral policy stance. This marks the fourth rate cut by the central bank this year, after holding rates steady in its August and October reviews.

 

RLLR-linked loans are directly benchmarked to the repo rate. This means banks must adjust these rates whenever the RBI changes its policy rate. PNB’s move mirrors similar revisions announced by other public-sector lenders, including Bank of India and Indian Bank, which also cut their benchmark external lending rates by 25 bps.

 

Will your EMI go down?

If you have a floating-rate home loan linked to RLLR, the answer is yes, but not instantly.

 

Most banks revise repo-linked loan rates at a reset interval, usually once every three months.

 

This means:

 

• If your last reset happened recently (for example, in October), the lower rate will typically reflect from January.

 

• Your equated monthly instalment (EMI) will fall unless you opt to keep the EMI unchanged and reduce the loan tenure instead.

 

Borrowers on older benchmarks such as MCLR or Base Rate will not benefit from this reduction unless they shift to the RLLR regime. Those decisions depend on factors such as remaining loan tenor, rate spreads, and switching charges.

 

What exactly is RLLR?

RLLR is the interest rate at which banks lend retail loans that are directly linked to an external benchmark, in most cases, the RBI repo rate. Since October 2019, banks have been required to link all new floating-rate retail loans to an external benchmark to improve transparency and pass through.

 

An RLLR-linked home loan therefore moves up or down in line with RBI policy decisions, giving borrowers faster and more predictable transmission of rate cuts, as seen after the latest MPC meeting.