The Reserve Bank of India (RBI) has reduced the repo rate by 25 basis points to 6.25%, its first rate cut in almost two years. In response, several major banks, including Canara Bank, PNB, Union Bank of India, and Bank of Baroda, have cut their repo-linked lending rates by 0.25%. This reduction will benefit home loan borrowers, who will have the option to either reduce their EMIs while keeping the tenure unchanged or reduce their remaining tenure while keeping the EMI amount unchanged.
The repo-linked lending rate (RLLR) is the interest rate at which banks lend money to customers, based on the repo rate set by the RBI. The majority of banks have linked their retail loans to the external benchmark lending rate (EBLR), which is now pegged to the repo rate. Home loan borrowers who opt for a floating rate loan will see their interest rates fluctuate with changes in the repo rate.
The reduction in RLLR will have different implications for old and new home loan borrowers. New borrowers will immediately benefit from the reduction, while old borrowers will receive the benefit as per their interest rate reset cycle. Canara Bank, Bank of Baroda, Bank of India, Union Bank of India, and Punjab National Bank have revised their RLLR rates, with the effective dates ranging from February 7 to 12, 2025. Indian Overseas Bank has also reduced its RLLR by 25 basis points to 9.10%.
The table above summarizes the latest RLLR and lending rate changes by major banks following the RBI’s repo rate cut. Home loan borrowers of these banks will have the option to reduce their EMIs or tenure, providing relief from rising interest rates.