In a significant move to boost credit growth and support economic expansion, the Reserve Bank of India (RBI) reduced the repo rate by 50 basis points on 6 June 2025, bringing it down from 6.00% to 5.50%. Following this policy easing, major Indian banks have swiftly responded by slashing their lending rates, making it cheaper for individuals and businesses to borrow.

This coordinated rate transmission, as emphasised by RBI Governor Sanjay Malhotra, reflects the banking sector’s readiness to align with monetary policy objectives and stimulate demand.

Major Banks That Cut Lending Rates

1. Bank of Baroda (BoB)

• Rate Cut: 50 basis points

• Old BRLLR: 8.65%

• New BRLLR: 8.15%

• Effective From: 7 June 2025

• Impact: Benefits both new and existing home loan and SME borrowers.

2. Punjab National Bank (PNB)

• Rate Cut: 50 basis points

• Old RLLR: 9.60%

• New RLLR: 9.10%

• Effective From: 10 June 2025

• Impact: Cheaper home, auto, and MSME loans.

3. UCO Bank

• Rate Cut: 50 basis points

• Effective Immediately

• Impact: Borrowing costs lowered across segments, benefiting retail and business borrowers.

4. Bank of India (BoI)

• Rate Cut: 50 basis points

• Old RLLR: 9.25%

• New RLLR: 8.75%

• Effective From: 10 June 2025

• Impact: Reduced lending cost for floating-rate retail loans and MSME advances.

5. Indian Overseas Bank (IOB)

• Rate Cut: 50 basis points

• New RLLR: 8.35%

• Effective From: 12 June 2025

• Impact: Greater affordability for borrowers in multiple categories.

6. Canara Bank

• Rate Cut: 20 basis points (MCLR)

• Effective Across All Tenures

• Effective From: 12 June 2025

• Impact: Lower interest on MCLR-linked loans, offering relief to long-term borrowers.

Why Has RBI Cut the Repo Rate?

The RBI’s Monetary Policy Committee reduced the key policy rate to encourage credit flow and support economic momentum in the face of global headwinds and subdued domestic demand. The decision aims to bring down borrowing costs, enabling businesses to invest and consumers to spend more.

By lowering the repo rate—the rate at which the RBI lends money to commercial banks—the central bank sets the tone for overall interest rate movement in the economy.

How Does This Help Borrowers?

With banks passing on the repo rate cut, the cost of new and existing loans—including home loans, car loans, and MSME advances—is set to fall. This not only boosts affordability for consumers but also encourages more borrowing, potentially leading to higher consumption and investment.

Borrowers with floating-rate loans will benefit most, as their EMIs are likely to reduce in line with the new Repo Linked Lending Rates (RLLRs).

Broader Economic Impact

The widespread reduction in lending rates suggests full monetary policy transmission, which is crucial for achieving the RBI’s goal of economic revival. Lower interest rates can:

• Stimulate demand in sectors like real estate and automobiles

• Improve MSME liquidity and help small businesses expand

• Enhance consumer spending, thereby pushing GDP growth

This trend also points to improved coordination between the central bank and commercial lenders, paving the way for faster recovery and investment.

What Should Borrowers Do Now?

• New Borrowers: This is a favourable time to take loans, especially for housing and businesses. Look for banks with the lowest RLLRs or MCLRs.

• Existing Borrowers: If your loan is linked to a higher fixed rate, consider switching to a floating rate or exploring balance transfer options to lower your EMIs.

• MSMEs and Entrepreneurs: Lower borrowing costs can be utilised to expand operations, invest in infrastructure, or manage working capital more efficiently.

Conclusion

The RBI’s proactive 50 basis point rate cut has led to an immediate and synchronised response from major public sector banks, bringing relief to millions of borrowers across India. This decisive shift signals a strong push towards credit expansion, growth in consumption, and a favourable lending environment for the near term.

As banks align their rates with RBI’s policy direction, the economic outlook brightens for both consumers and businesses, ushering in a period of cheaper loans and improved financial viability across sectors.

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