Public Sector Banks Slash Home Loan Interest Rates Following RBI Repo Rate Cut
In a move aimed at benefiting home loan borrowers, several major public sector banks in India, including the State Bank of India (SBI), Punjab National Bank (PNB), Indian Bank, and Bank of India, have announced reductions in their home loan interest rates. This slowdown comes in the wake of the Reserve Bank of India’s (RBI) recent 25 basis point reduction in the repo rate.
Impact of the RBI Rate Cut
The RBI’s decision earlier this month to cut the repo rate from 6.25% to 6% is the second consecutive decrease this year. The cut aims to encourage borrowing and stimulate economic activity by making loans more affordable for consumers. As the repo rate has a direct impact on lending rates, borrowers with floating interest rate loans will see a decrease in their equated monthly installments (EMIs). Most Indian banks, including the aforementioned public sector institutions, utilize the repo rate as the external benchmark for setting their interest rates.
Changes Made by Major Banks
State Bank of India (SBI)
As the largest public sector bank in the country, SBI has adjusted its external benchmark-linked lending rate (EBLR) from 8.90% to 8.65%, effective April 15, 2025. This 0.25% reduction will make home loans more manageable for existing and new borrowers alike.
Punjab National Bank (PNB)
Similarly, PNB has reduced its repo-linked lending rate (RLLR) from 8.90% to 8.65%. The bank has maintained its fixed margin, known as the Bank Spread (BSP), at 0.20%. As a result, the overall lending rate for customers has decreased from 9.10% to 8.85%, allowing for significant savings on home loan repayments.
Indian Bank
Indian Bank has also responded to the RBI’s rate cut by reducing its RBLR from 9.05% to 8.70%. According to a filing with the Bombay Stock Exchange (BSE), these updated rates will apply to all repo-linked loans and will be in effect from April 11, 2025. ### Bank of India
In line with the RBI’s adjustments, the Bank of India has lowered its lending rates from 9.10% to 8.85%. The new repo-linked benchmark lending rate will be effective from April 9, 2025, marking a 25 basis point decrease, which reflects the bank’s commitment to enhancing affordability for borrowers.
Understanding Repo-Linked Lending Rates
The repo-linked lending rate (RLLR) is the interest rate at which banks extend loans to consumers, and it is directly influenced by the RBI’s repo rate. Following a circular issued by the RBI in October 2019, banks are mandated to link their retail loans to an external benchmark lending rate (E-BLR), with the repo rate being a preferred benchmark for most institutions.
With the current trend of decreasing rates, borrowers with floating interest rates will benefit from lower EMIs, thereby easing their financial burden.
Conclusion
The recent rate cuts by leading public sector banks reflect a commitment to fostering a favorable borrowing environment in response to the RBI’s monetary policy adjustments. These changes are expected to stimulate the housing market and promote economic growth, by making home loans more affordable for a wider range of consumers. As the lending landscape evolves, borrowers are encouraged to stay informed and consider their options to take advantage of these reductions.
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