PNB, Bank of India trim MCLR rates: How decision may help borrowers

Customers repaying loans linked to older benchmark may benefit as revised terms come into effect

Punjab National Bank (PNB) and Bank of India (BoI) have cut their marginal cost of funds-based lending rates for September, offering respite to borrowers whose loans are linked to the MCLR system.

 

The state-owned lenders’ revised rates came into effect on September 1.

 

Rate cut

 

MCLR is the internal benchmark used by banks to price floating-rate products such as home, personal and car loans sanctioned before October 2019. Reducing MCLR may lower equated monthly instalments (EMIs) for borrowers.

 

Floating-rate loans are linked to the external benchmark lending rate (EBLR), typically to the repo rate set by the Reserve Bank of India (RBI). However, banks allow existing MCLR borrowers to switch to EBLR-linked loans.

 

PNB’s new rates

 

PNB has lowered MCLR across tenures by up to 15 basis points (bps):

 

• Overnight: 8.00 per cent (earlier 8.15 per cent) 
• One month: 8.25 per cent (earlier 8.30 per cent) 
• Three months: 8.45 per cent (earlier 8.50 per cent) 
• Six months: 8.65 per cent (earlier 8.70 per cent) 
• One year: 8.80 per cent (earlier 8.85 per cent) 
• Three years: 9.10 per cent (earlier 9.15 per cent)

 

The move could benefit PNB customers servicing home or business loans linked to MCLR.

 

BoI’s new rates

 

BoI has also cut its lending rates across most tenures, except for the overnight rate (which is unchanged at 7.95 per cent). Key revised rates are:

 

• One month: 8.30 per cent (earlier 8.40 per cent) 
• Three months: 8.45 per cent (earlier 8.55 per cent) 
• Six months: 8.70 per cent (earlier 8.80 per cent) 
• One year: 8.85 per cent (earlier 8.90 per cent) 
• Three years: 9.00 per cent (earlier 9.15 per cent)

 

The step-down of 5-15 bps mirrors PNB’s reduction, though at slightly different levels.

 

Why this matters now

The cuts come even as the RBI left the repo rate steady at 5.5 per cent in its August policy review. With banks lowering rates independently, borrowers still on MCLR stand to gain marginal relief in EMIs from September.

 

For households juggling tight budgets, these small reductions could ease monthly cash flow pressures, though the benefit depends on loan tenure and outstanding balance.