SBI, PNB, Canara, IOB cut loan rates: What it means for borrowers

Following the RBI's repo rate cut, major public-sector lenders are offering relief to home and auto loan borrowers

Monthly loan repayments will reduce as several public-sector banks have lowered lending rates following the Reserve Bank of India’s recent policy announcement. Earlier this month, the RBI reduced the repo rate by 25 basis points to 5.25 per cent, prompting lenders to pass on the benefit to customers with loans linked to external benchmarks.

 

The cuts largely apply to repo-linked and external benchmark-linked loans, which adjust automatically when the policy rate changes. For many home, auto and personal loan borrowers, this could mean lower equated monthly instalments (EMIs) or a shorter loan tenure.

 

How banks have responded

Canara Bank has cut its repo-linked benchmark lending rate to 8 per cent from 8.25 per cent, effective December 12. Existing borrowers on repo-linked loans should see a direct impact on their EMIs.

 

 

Punjab National Bank has reduced its repo-linked lending rate to 8.10 per cent, down from 8.35 per cent, with effect from December 6. 

Indian Overseas Bank has revised its repo-linked rate to 8.10 per cent from December 15. The bank has also adjusted its marginal cost of funds-based lending rates, with the one-year MCLR at 8.80 per cent.

 

Indian Bank has lowered its repo-linked rate to 7.95 per cent from 8.20 per cent, applicable to its loan book from December 6.

 

Bank of India has brought down its repo-based lending rate to 8.10 per cent, effective December 5.

 

SBI and Bank of Baroda offer relief

State Bank of India has reduced its lending rates from December 15. While the exact rate for each borrower will depend on credit risk premiums and spreads, the benchmark cut is expected to translate into lower borrowing costs.

 

Bank of Baroda has also announced a reduction in its effective benchmark-linked lending rate to 7.90 per cent, offering modest relief to eligible customers from December 6.

 

Retail borrowers gain

Bank of Maharashtra has gone a step further by cutting retail loan rates. Home loan rates have been reduced to 7.10 per cent, while car loan rates now start at 7.45 per cent. The bank has also waived processing fees, lowering the upfront cost for new borrowers.

 

What borrowers should do

Existing borrowers should check whether their loans are linked to an external benchmark such as the repo rate. If so, the benefit should flow automatically. New borrowers may find this a good time to negotiate better terms, as competition among banks intensifies.

 

Overall, the latest round of rate cuts signals a more borrower-friendly environment, especially for households managing long-term loans amid easing interest rates