RBI's repo rate cut effect: Taking loans from these banks just got cheaper

Following the Reserve Bank of India’s decision to cut the repo rate by 50 basis points on 6 June 2025, several major Indian banks have announced reductions in their respective lending rates to pass on the benefits to borrowers. The RBI's Monetary Policy Committee, chaired by Governor Sanjay Malhotra, reduced the key policy rate from 6.00% to 5.50%, aiming to stimulate economic activity by reducing borrowing costs.

In a swift response, Bank of Baroda (BoB) was among the first to act, reducing its Baroda Repo Linked Lending Rate (BRLLR) by 50 basis points to 8.15% from 8.65%, effective 7 June. This adjustment is set to benefit both new and existing home loan and SME borrowers.

Punjab National Bank (PNB) followed suit, cutting its Repo Linked Lending Rate (RLLR) from 9.60% to 9.10% effective 10 June, which is expected to make home, auto, and MSME loans more affordable.

UCO Bank also announced a 50 basis point reduction in its repo-linked lending rate, aimed at lowering funding costs for borrowers across various segments.

Similarly, Bank of India reduced its RLLR by 50 basis points, bringing it down from 9.25% to 8.75% effective 10 June. This revised rate is applicable to all new floating-rate retail loans and MSME advances. Indian Overseas Bank (IOB) has taken similar steps, reducing its RLLR by 50 basis points to 8.35%, with the new rate becoming effective on 12 June.

Meanwhile, Canara Bank opted to cut its Marginal Cost of Funds Based Lending Rate (MCLR) by 20 basis points across all loan tenures, also effective from 12 June.

This coordinated move by the banks highlights their efforts to fully transmit the RBI's policy easing to consumers, potentially spurring economic growth through increased borrowing and spending. The changes in lending rates by these banks are expected to provide significant relief to borrowers, particularly in the home and MSME sectors, thus enhancing their financial viability. As these banks adjust their lending costs, it signifies a broader trend in the banking industry to align with the monetary policy directions set by the RBI, reflecting an environment conducive to economic expansion.