Banks Reduce Loan Interest Rates After RBI Repo Rate Cut

Banks Start Passing on the Benefits

Soon after the RBI announcement, several major banks began slashing their lending rates. The rate cuts ranged between 10 and 50 basis points, varying banks and loan types.

Here is a detailed paragraph for each bank mentioned, outlining the individual cuts they’ve made to lending rates following the RBI’s repo rate and CRR reduction:

Punjab National Bank (PNB)

Punjab National Bank acted swiftly to pass on the RBI’s 50 basis point repo rate cut to its customers. The bank reduced its Repo-Linked Lending Rate (RLLR) by a full 50 basis points, bringing it down from 8.85 to 8.35 per cent. This rate cut is significant, especially for retail borrowers, as it directly lowers the interest rate on loans linked to the repo rate. The new rates are applicable from June 10, 2025.

Bank of India

Bank of India has also announced a 50 basis point cut in its repo-linked lending rate, mirroring the move made by PNB. This brings its RLLR down to 8.35 per cent as well. This reduction will apply to a wide range of floating-rate retail and corporate loans. The bank's decision reflects its commitment to supporting customers and stimulating credit growth. Borrowers repaying housing, personal, or vehicle loans under floating-rate agreements can expect a decrease in their EMIs in the coming cycles. The revised rates are scheduled to take effect from June 10, 2025.

Bank of Baroda

Bank of Baroda has revised its lending rates in response to the RBI’s decision, cutting its Repo-Linked Lending Rate (RLLR) by 50 basis points. While exact new rate figures were not disclosed, the bank clarified that the reduction will apply to select loan categories, especially those linked directly to the repo rate. These include home loans, MSME loans, and other floating-rate offerings. Bank of Baroda has historically been quick to transmit monetary policy changes and aims to maintain its position as a customer-friendly, growth-oriented lender. The new rates are set to be effective from June 10, 2025, and are expected to boost credit demand across retail and business segments.

UCO Bank

UCO Bank has chosen a slightly different path by reducing its Marginal Cost of Funds based Lending Rate (MCLR) instead of RLLR. The bank has cut its MCLR by 10 basis points across all loan tenures. For example, the one-year MCLR has been brought down from 9.10 per cent to 9.00 per cent. This change will affect borrowers whose loans are linked to MCLR rather than directly to the repo rate. While this cut is smaller than the 50 bps repo rate reduction, it still offers moderate relief to customers. The new MCLR-based rates will apply from June 10, 2025.

HDFC Bank

HDFC Bank, one of India’s largest private sector banks, has opted for a 10 basis point reduction in its MCLR across all loan tenures. While it hasn’t altered its repo-linked loan rates as significantly as some public-sector counterparts, the cut in MCLR will benefit a large base of borrowers whose loans are not directly tied to the repo rate. The reduced MCLR will now apply to a variety of loan products including auto, personal, and SME loans. For instance, if a customer’s housing loan is linked to the one-year MCLR, their EMI could decrease marginally from this month. These new rates are effective June 7, 2025, making HDFC one of the first to implement the change post-RBI announcement.

These reductions are expected to take effect between June 7 and June 10, depending on the bank’s internal timelines.

Canara Bank

Canara Bank has reduced its Repo Linked Lending Rate (RLLR) from 8.75 per cent to 8.25 per cent, following the Reserve Bank of India's (RBI) announcement of a 50 basis point reduction from 6.00 per cent to 5.50 per cent in the Monetary Policy Committee (MPC) meeting. This marks the third consecutive rate cut by the RBI in 2025, signalling a supportive stance towards economic growth and easing inflation. The revised lending rates will be effective from 12th June 2025. The RLLR reduction is 0.50 per cent, reflecting the RBI's repo rate decrease. Customers with loans linked to RLLR may benefit from reduced EMIs or shorter loan tenure. Canara Bank aims to provide a better banking experience to its customers.

Borrowers Can Expect Lower EMIs

With the fall in lending rates customers with floating interest rate loans can expect a decrease in their EMIs. This includes people paying EMIs for all loans. these loans include; housing, vehicles, education, and personal expenses. For new borrowers, this is a good time to consider taking loans as interest rates are now at their lowest in recent months.

However, fixed-rate borrowers will not benefit unless they opt for a loan balance transfer or negotiate with their lenders.

RBI’s New Focus: Growth Over Inflation

Over the past year, RBI focused mainly on controlling inflation. Now, with eased and controlled inflation the focus has shifted to growth. The Indian economy has seen a slight dip in growth, and the central bank wants to encourage more borrowing, business investment, and consumer demand.

By reducing the CRR from 4 to 3 per cent, the RBI has also increased liquidity in the banking system. Banks now have more funds to lend leading to improved credit availability to the people.

Experts See Positive Impact

Analysts believe this move is timely and will have a positive impact on various sectors, especially housing, automobiles, small businesses, and infrastructure. The slashed rates might lead to an increase in consumer demand further supporting job creation specifically in sectors that rely on credit. However, there is a major concern about banks ability to maintain their profit margins due to lower interest income.

What’s Next for Borrowers and Investors

Amid increased lending affordability, borrowers are advised to compare rates across banks to choose the best deal. This is also a good opportunity to consider refinancing existing loans to take advantage of lower rates.