Lower EMIs, loan rates in July as three state-owned banks cut MCLR by 5 bps

Home, auto and corporate loans set to reduce as lenders trim minimum interest rate that they are allowed to charge on loans

Punjab National Bank (PNB), Indian Bank and Bank of India in July reduced their Marginal Cost of Funds-based Lending Rates (MCLR) by 5 basis points (bps) across various tenures. The state-owned lenders’ decision is set to make borrowing cheaper for retail and corporate customers and it follows the Reserve Bank of India (RBI) lowering the repo rate by 100 bps since February 2025

 

What is MCLR

MCLR is the minimum interest rate below which banks cannot lend, except in cases allowed by the RBI. It acts as a benchmark for home, auto, and personal loans. Changes in MCLRs impact borrowers with floating rate loans linked to it.

 

PNB slashes rates across tenures

PNB, India’s second-largest public sector bank, has trimmed its MCLR by 5 bps across all tenures, effective July 1.

 

• Overnight MCLR: Reduced from 8.25 per cent to 8.20 per cent 
• One-year MCLR: Lowered from 8.95 per cent to 8.90 per cent (key for home loan borrowers) 
• Three-year MCLR: Cut from 9.25 per cent to 9.20 per cent

Indian Bank adjusts benchmark rates

 

Indian Bank’s revised rates, applicable from July 3, show a similar 5 bps reduction for key tenures.

 

• One-month MCLR: Down from 8.45 per cent to 8.40 per cent 
• Six-month MCLR: Reduced from 8.90 per cent to 8.85 per cent 
• One-year MCLR: Brought down from 9.05 per cent to 9 per cent

 

Bank of India brings relief for borrowers

Effective July 1, Bank of India has also cut MCLR by 5 bps.

 

• Overnight MCLR: From 8.15 per cent to 8.10 per cent. 
• One-year MCLR: From 9.05 per cent to 9 per cent 
• Three-year MCLR: From 9.20 per cent to 9.15 per cent

 

MCLR tenures

Banks publish MCLR for different loan tenures: overnight, one-month, three-month, Six-month, one-year and more. It indicates the minimum interest rate for a loan of that period:

 

-Overnight MCLR: The rate for loans maturing the next day.

 

-One-month MCLR: The rate for loans taken for a month.

 

-Three-month MCLR: Applies to loans with a 3-month maturity.

 

One-year MCLR: Most crucial for retail borrowers, as home and auto loans are often linked to this.

 

MCLR and loan customers

For borrowers with floating-rate loans linked to MCLR, this means marginally lower loan repayment installments. However, the actual benefit will depend on the reset date of your loan contract. New borrowers stand to gain slightly more with lower starting rates.

 

Financial advisors recommend reviewing loan terms to understand how and when MCLR changes translate into EMI revisions.