· Bank of Baroda cuts MCLR by up to 15 bps from Sept 12, 2025.
· Indian Overseas Bank revises MCLR effective Sept 15, 2025.
· Festive season coincides with MCLR cuts enhancing borrower sentiment.
· Lower MCLR means cheaper loans for home and personal financing.
· Recent GST cuts add to positive economic outlook for borrowers.
Bank of Baroda (BoB) and Indian Overseas Bank (IOB) have revised their Marginal Cost of Fund-based Lending Rate (MCLR) by up to 15 per cent (15 basis points-bps), ahead of the festive season that is to start from next week. Due to the revision, which is precisely a reduction in interest rate, the MCLR-based loans with these banks would become cheaper for borrowers. With the recent Goods and Services Tax (GST) rationalisation, which is to become effective from September 22, 2025, coinciding with the start of the Navratri festival, a nine-day festival that is considered auspicious to start something new, the reduced MCLR of banks adds to the festive sentiment.
Here are the details of the recently revised MCLR rates of these two banks.
The bank has reduced three-month MCLR by 15 basis points (bps) and overnight MCLR by 10 bps, from the previous rates. The latest MCLR rates are effective September 12, 2025.
Source: Bank of Baroda website
IOB reduced MCLR by 0.5 per cent (5 bps) for one-, two-, and three-year tenures, effective September 15, 2025. The other tenure MCLR remained unchanged.
Source: Indian Overseas Bank website
MCLR is the minimum interest rate, below which banks are not allowed to lend money to borrowers. It is linked with the Repo rate, and when the repo rate is cut, MCLR typically goes down. This makes floating rate-based home loans, consumer loans, and personal loans, among others, cheaper. However, the Repo rate is only one of the factors under the four major components used to determine MCLR. These include:
• Marginal cost of funds (repo rate is a part of this component)
• Cash Reserve Ratio (CRR)
• Operating expenses
• Tenure premium
Based on these components, every bank sets its own MCLR rate.
Reduced MCLR means the reduced lending rate for the borrower, which can result in either a lower equated monthly installment or a shorter loan repayment period. Notably, the reduced rates are applicable only to the flexi rate loans, not the fixed rate ones.
In the last few months, several banks, including the State Bank of India (SBI), Central Bank of India, HDFC Bank, Punjab National Bank, and Bank of India, reduced MCLR.
