Major Indian Banks Reduce Interest Rates, Offering Relief to Borrowers
Interest Rate Cuts by Major Banks
Significant relief has been provided to customers by major public sector banks in India. Punjab National Bank (PNB), Indian Bank, and Bank of India have all reduced their interest rates by 5 basis points. This adjustment means that borrowers for home loans, auto loans, and other types of credit will now benefit from lower interest payments. The new rates have been effective since July 1, 2025, following a 100 basis point reduction in the repo rate by the Reserve Bank of India (RBI) in February 2025.
Understanding MCLR
First, let's clarify what MCLR, or Marginal Cost of Funds Based Lending Rate, means. This is the minimum interest rate at which banks lend money. It sets the baseline for loan interest rates, and according to RBI regulations, banks cannot offer loans at rates lower than this unless specific concessions are made.
PNB's Interest Rate Reduction
Punjab National Bank, the second-largest public sector bank in the country, has implemented a 5 basis point reduction in MCLR across all tenures, effective from July 1, 2025.
New MCLR Rates for PNB
- One-Day MCLR: Reduced from 8.25% to 8.20%.
- One-Month MCLR: Decreased from 8.40% to 8.35%.
- Three-Month MCLR: Lowered from 8.60% to 8.55%.
- Six-Month MCLR: Dropped from 8.80% to 8.75%.
- One-Year MCLR: Important for home loans, reduced from 8.95% to 8.90%.
- Three-Year MCLR: Decreased from 9.25% to 9.20%.
Indian Bank's Rate Adjustments
Indian Bank has also reduced its MCLR by 5 basis points for several tenures, with the new rates coming into effect on July 3, 2025.
New MCLR Rates for Indian Bank
- One-Day MCLR: No change at 8.20%.
- One-Month MCLR: Reduced from 8.45% to 8.40%.
- Three-Month MCLR: Lowered from 8.65% to 8.60%.
- Six-Month MCLR: Dropped from 8.90% to 8.85%.
- One-Year MCLR: Decreased from 9.05% to 9.00%.
Bank of India's Decision
Bank of India has also implemented a 5 basis point reduction in MCLR across all tenures, effective from July 1, 2025.
New MCLR Rates for Bank of India
- One-Day MCLR: Reduced from 8.15% to 8.10%.
- One-Month MCLR: Decreased from 8.45% to 8.40%.
- Three-Month MCLR: Lowered from 8.60% to 8.55%.
- Six-Month MCLR: Dropped from 8.85% to 8.80%.
- One-Year MCLR: Reduced from 9.05% to 9.00%.
- Three-Year MCLR: Decreased from 9.20% to 9.15%.
Benefits for Customers
The reduction in interest rates by these banks will ease the burden of EMIs for borrowers, particularly those taking home and auto loans. This move, following the RBI's repo rate cut, is significant for stimulating the economy and providing relief to customers.