The Reserve Bank of India (RBI) cut the repo rate by 50 basis points in its 55th Monetary Policy Committee (MPC) meeting on June 9, 2025, to 5.5 per cent from 6 per cent. As a result of this reduction, some public sector banks, such as Bank of Baroda, Punjab National Bank, UCO Bank, and private sector banks, like HDFC Bank, have reduced their lending rates, primarily repo linked lending rates (RLLR).
New Lending Rates At Major Banks
Some public sector banks have changed their repo-linked lending rates (RLLR):
Bank of Baroda cut its RLLR by 50 basis points to 8.15 per cent from June 7.
Punjab National Bank reduced its RLLR to 8.35 per cent from June 9, while leaving its MCLR unchanged.
Bank of India reduced its RLLR to 8.30 per cent with effect from June 6.
UCO Bank reduced both its RLLR and MCLR. Its RLLR stands at 8.30 per cent and the one-year MCLR fell to 9 per cent after a 10 basis points reduction across all tenors.
Private Banks Make Small Adjustments
Among the private sector banks, HDFC Bank lowered its MCLR by 10 basis points for all tenors from June 7. Its one-month and overnight lending rates are now at 8.9 per cent. Private lenders, as of now, haven't cut their repo-linked rates substantially.
Under RBI regulations, floating-rate loans need to be reset based on the benchmark repo rate at regular intervals. This would automatically benefit the existing borrowers with a cut in interest rates as per the terms and conditions of their loan contracts.
Banks Had Already Provided Competitive Rates
Despite the recent rate cut, a number of banks had already been providing low home loan rates:
Bank of India, Bank of Maharashtra, Central Bank of India, and Union Bank of India were lending at 7.85 per cent for Rs 30 lakh.
Canara Bank, Indian Bank, Indian Overseas Bank, and UCO Bank lent at 7.90 per cent. For Canara Bank, it was for loans above Rs 75 lakh, whereas for others, it was for loans of up to Rs 30 lakh.
Among the private banks, South Indian Bank offered the lowest home loan rate at 8.30 per cent for loans up to Rs 30 lakh.
Old Borrowers Stand To Gain More
Existing floating-rate borrowers will gain more from the rate reduction than new borrowers. This is due to the fact that banks can change the spread or markup—the additional rate above the benchmark such as the repo rate or MCLR (Marginal Cost of Funds Based Lending Rate)—on new loans. The spread is determined by characteristics such as the borrower's credit score, loan size etc.
Since some banks have already started providing lower rates to attract market share, particularly on small loans, most current borrowers are in a better position now to reap further rate cuts.
Fixed Deposit Rates May Decline
Banks can also cut fixed deposit (FD) rates to safeguard their margins as loan prices fall. As the cut in the repo rate results in more liquidity in the system, rates on fresh FDs could fall, making them less appealing for savers.
Although the rate reduction should bring down borrowing costs across the board, customers—new borrowers in particular—should carefully examine the final lending rate.
