If you’re among those who took a home loan a few years ago and have been feeling the pinch of rising EMIs, here’s some relief! Leading banks in the country have announced reductions in their lending rates, which means millions of existing borrowers are set to benefit. Banks such as SBI, HDFC Bank, Punjab National Bank (PNB), Bank of Baroda (BoB), and Indian Overseas Bank (IOB) have revised their rates, directly lowering the monthly installment amount for home loan customers.
This step comes even as the RBI has kept the repo rate unchanged. By cutting their internal lending costs, banks are finally passing on the earlier benefits to their old customers. But who exactly will benefit from this reduction, and how much impact will it really have on your EMI? Let’s break it down.
Who Will Benefit from the Rate Cut?
The relief announced by banks isn’t across the board—it specifically helps borrowers whose loans are linked to MCLR (Marginal Cost of Funds-Based Lending Rate).
Here’s why:
- Before 2019, home loans were mostly based on MCLR, where the bank set its own lending rate depending on its internal cost of funds.
- After 2019, RBI introduced EBLR (External Benchmark Lending Rate), which is tied directly to the central bank’s repo rate. Under EBLR, loan rates fluctuate immediately with any RBI updates.
Since the current cut is in MCLR, only those who had taken loans before the RBI’s 2019 rule—or those whose loan agreements are still linked to MCLR—stand to benefit. Simply put, this is great news for long-time borrowers.
How Much Relief Has Each Bank Given?
Here’s a quick overview of the revised MCLR rates and reductions:
- SBI – Effective August 15, 2025: New range 7.90% – 8.85% (cut of up to 0.05%)
- Bank of Baroda – Effective August 12, 2025: 7.95% – 8.80% (reduced up to 0.10% – 0.35%)
- Canara Bank – No change; remains at 7.95% – 8.95%
- HDFC Bank – Effective August 7, 2025: 8.55% – 8.75% (minor cut)
- PNB – Effective August 1, 2025: 8.15% – 9.15% (cut of 0.05%)
- Indian Overseas Bank – Effective August 15, 2025: 8.05% – 8.90% (cut of 0.10%)
Now, while the reduction may look small—just 0.05% or 0.10%—the long-term savings on a large loan actually become quite meaningful.
👉 Example: Imagine a ₹30 lakh loan for 20 years at 9% interest.
- Old EMI: ₹26,992
- After 0.05% cut (to 8.95%): EMI becomes ₹26,894
- Monthly saving: ₹98
- Yearly saving: ₹1,176
- 20-year saving: ₹23,520
With a 0.10% reduction, the total benefit could cross ₹47,000 over the loan tenure.
What Should You Do Next?
If you have a home loan, here are the steps you must take to maximize the benefit:
- Check Your Loan Type – Look at your loan agreement to see whether it’s linked to MCLR or EBLR. Only MCLR-linked loans benefit from these cuts.
- Know Your Reset Date – MCLR-linked loans don’t adjust daily. Banks review the rates periodically (commonly after 6 months or 1 year). You’ll see the reduced EMI only after your reset date.
- Consider Switching to EBLR – If you want instant reflection of repo rate changes, you can request to shift from MCLR to EBLR.
- Benefit: Any RBI rate cut is passed on immediately, lowering your EMI.
- Risk: If RBI hikes repo rates in the future, your EMI could rise quickly too.
- Benefit: Any RBI rate cut is passed on immediately, lowering your EMI.
This rate cut is a welcome move that gives long-time home loan borrowers some breathing space. While the savings might look small in the short run, over the entire loan period, they can add up significantly. Staying aware of your loan type, reset date, and switching options can help you make the most of these changes.
