The Reserve Bank of India (RBI) has made headlines once again by cutting the repo rate by 0.25 percent, a move that has prompted major banks across the country to reduce their loan interest rates. This marks the second consecutive rate cut in just two months, with the previous reduction occurring in February 2025. The implications of this decision are significant for borrowers, particularly those with floating interest rates, as it directly affects their monthly payments.
Following the RBI's announcement on April 9, several prominent public sector banks, including the State Bank of India (SBI), Bank of India, Punjab National Bank (PNB), and Indian Bank, have already revised their lending rates. The SBI, being the largest public sector bank in India, has reduced its external benchmark-linked lending rate (EBLR) from 8.90% to 8.65%, effective from April 15, 2025. This change is expected to provide relief to many customers who have taken loans tied to the bank's floating interest rates.
PNB has also joined the trend, lowering its RLLR from 8.90% to 8.65%, which effectively brings down the final interest rate for customers from 9.10% to 8.85%, thanks to no changes in the bank's spread. Similarly, the Bank of India has cut its RBLR from 9.10% to 8.85%, with this new rate implemented from April 9, 2025. Indian Bank has reduced its RBLR from 9.05% to 8.70%, with new rates effective from April 11, 2025.
Other banks are following suit as well. For instance, Bank of Maharashtra has cut its rates by 25 basis points, bringing its loan rates down to 8.80%, previously standing at 9.05%. Their home loan rates will now start at 7.85% per year, while car loan rates will begin at 8.20% per year. UCO Bank has also adjusted its Repo-Linked Lending Rate (RLLR) from 9.10% to 8.80%, effective from April 10, 2025.
However, not all banks have been quick to implement these changes. Many customers are still waiting for official notifications regarding the new rates. Bank officials have indicated that they are awaiting circulars to finalize the new rates. For example, branch managers from SBI and Bank of Baroda confirmed the rate cuts but noted that they had not yet received the necessary official documentation to apply these changes.
Devidas Tuljapurkar, Coordinator of the United Forum of Bank Unions, has criticized the delays in implementing the repo-linked rate cuts, emphasizing that banks should act swiftly to facilitate the RBI's efforts to enhance liquidity and reduce borrowing costs. He stated, "Banks must not block the RBI’s efforts to improve liquidity and reduce borrowing costs." This sentiment resonates with many borrowers who are eager for the promised relief.
In light of the ongoing situation, financial advisors are urging customers to explore their options. CA Rohan Achalya has suggested that borrowers compare loan rates across different banks. If individuals find that their current rates are higher than those offered by competitors, he recommends considering transferring their loans to banks with more favorable terms. Strong negotiation skills can also play a crucial role in this process, potentially leading to better rates and terms for borrowers.
The RBI's decision to cut the repo rate is primarily aimed at stimulating economic growth by encouraging borrowing. When the repo rate is lowered, it becomes cheaper for banks to borrow money from the RBI, which in turn allows them to offer lower interest rates to customers. This mechanism is particularly beneficial for those with floating-rate loans, as it directly reduces their monthly installments.
As many banks have now linked their retail loan rates to the repo rate set by the RBI, the impact of this latest cut is expected to be felt quickly across the banking sector. However, the speed at which these changes are implemented can vary between institutions, leading to some customers experiencing delays in receiving the benefits.
For borrowers, this rate cut presents an opportunity to reassess their financial situations. With home loans, car loans, and personal loans becoming more affordable, many individuals may find it advantageous to take out new loans or refinance existing ones. The reduced interest rates can lead to significant savings over the life of a loan, making this an ideal time for those considering major purchases or investments.
In summary, the RBI's recent repo rate cut has set off a chain reaction among major banks, leading to reduced loan interest rates that promise to benefit borrowers across the country. While some banks have swiftly implemented these changes, others are still in the process of finalizing their new rates. As customers await further updates, financial experts encourage them to take proactive steps in evaluating their loan options and exploring the potential for savings.
