Home loan relief after RBI move: HDFC Bank, PNB, BoB and others cut rates

Major lenders are lowering their loan rates, providing immediate relief to existing borrowers and improving the outlook for the retail credit market

Home loan EMIs are likely to reduce in some weeks, as large lenders reduce their rates after the policy repo rate was cut by 25 basis points to 5.25 per cent on December 5. The pass-through has begun across public and private sector banks, improving the outlook for both existing and new borrowers.

Why rates are falling

Banks price a large portion of retail loans, especially home financing, against external benchmarks, such as the repo rate, or internal benchmarks, such as the MCLR. When the policy rate is lowered, banks typically revise these benchmarks downwards.

 

For existing borrowers, the impact may show up in two ways:

 

• lower EMIs while keeping the tenure unchanged, or
• a shorter loan tenure while keeping the EMI constant.
• The actual benefit depends on the linkage of the loan (RLLR, RBLR or MCLR) and the borrower’s reset cycle.

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Major lenders announce rate cuts

HDFC Bank has reduced its marginal cost of funds-based lending rates by up to 5 basis points across tenures. Its MCLR now ranges between 8.30 per cent and 8.55 per cent, slightly lower than the earlier 8.35–8.60 per cent band. Borrowers with loans tied to MCLR will see the change reflected at their next reset date.

 

Punjab National Bank has revised its repo-linked lending rate to 8.10 per cent, down from 8.35 per cent. The new rate, effective 6 December, applies automatically to borrowers whose home loans are linked to this benchmark.

 

Bank of Baroda has trimmed its benchmark retail loan rate to 7.90 per cent from 8.15 per cent, offering a modest reduction in interest outgo for customers across home and other retail loans.

 

Indian Bank has cut its repo-linked benchmark rate to 7.95 per cent, while Bank of India has lowered its repo-based lending rate to 8.10 per cent, in line with the RBI’s policy move.

Borrowers to gain from cheaper retail credit

The most aggressive reduction so far has come from Bank of Maharashtra, which has cut its home loan rate to 7.10 per cent from 7.35 per cent. Car loan rates have also been reduced to 7.45 per cent, and the bank has waived processing fees, reducing the upfront cost for new borrowers.

What borrowers should do now

Those on floating-rate home loans should monitor their next reset date and confirm the benchmark linkage on their loan agreement. New borrowers may consider comparing offers across banks, as spreads and fees can materially affect long-term borrowing costs.