After the Reserve Bank of India (RBI) announced a 25 basis point reduction in the repo rate to 6.25% on February 7, loan borrowers are expected to see some relief. This marks the RBI’s first rate cut in five years and is set to ease the financial burden on retail loan borrowers, especially in the personal and home loan segment.

The repo rate is the interest rate at which the central bank lends to commercial banks in India. This rate influences the interest rates on different types of loans offered to bank customers, thereby regulating cash flow in the market.

Following the RBI’s decision, at least four public sector banks have adjusted their home loan interest rates. These include State Bank of India (SBI), Bank of Maharashtra (BoM), Punjab National Bank (PNB), and Union Bank of India (UBI).

From February 12, PNB is offering personal loans of up to Rs 20 lakh, starting at 11.25%. Customers can avail the loan without physically visiting the branch or submitting paperwork.

Bank of Maharashtra, which has introduced a 25 basis point reduction on retail loans, will now offer personal loans at 10%, one of the lowest at the moment.

In a similar move, the Union Bank of India has reduced the interest rate on its retail lending schemes since February 11. Its personal loan interest rate now starts at 11.50%.

Meanwhile, the lenders with costliest personal loans include SBI, Karur Vysya Bank, South Indian Bank, Central Bank of India, among others, the data from fintech platform Bankbazaar showed.

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Following the RBI’s directives, Bank of Maharashtra has reduced its benchmark home loan rate to 8.10%, one of the lowest, and waived processing fees on home and car loans. Meanwhile, the SBI has cut its home loan rate by 25 basis points to 8.25%. PNB is offering home loans with interest rates starting at 8.15% per annum.

According to the data compiled by Bankbazaar, Bank of Maharashtra's 8.10% is currently the lowest home loan rate available. Canara Bank has also revised its starting home loan rate to 8.15%, down from 8.40%, effective from February 12. Kotak Mahindra Bank, IDFC Home Loan, Axis Bank, and private sector banks remain among the costliest lenders, with rates above 8.75%, Bankbazaar data showed.

The repo rate also affects other loans like vehicle, certain education and business loans. Hence, a rate cut by the RBI means relief to borrowers as their EMIs are likely to decrease. For instance, Bank of Baroda customers are set to benefit as the lender has reduced the floating rate car loan by 65 basis points to 8.75%. Similarly, Bank of Maharashtra’s 25 basis point reduction on retail loans also applies to car loans, which has now come down to 8.45% per annum.

SBI’s standard car loan rates range from 9.2% to 10.15%. Meanwhile, PNB’s revised rates now offer car loans starting at 8.50%. Union Bank has also reduced its starting vehicle loan down to 8.45%. The education and other loans offered by the bank, linked with Repo Linked Lending Rate (RLLR), will also benefit from the change.

The decisions related to repo rates are made by the RBI’s Monetary Policy Committee (MPC), tasked with making the country’s monetary policy decision. Earlier this month, the MPC reduced the repo rate to boost economic activity by making borrowing cheaper and encouraging spending.

All retail floating-rate loans sanctioned after October 1, 2019, are linked to an external benchmark, which is the repo rate in the case of most banks. Hence, any changes in repo rate directly affect the interest rates on these loans. As a result, banks are required to pass on the full benefit of any rate cuts to borrowers. The central bank’s guidelines also mandate that banks review and adjust their interest rates at least once every quarter.

To be clear, the home, personal and loan rates offered by various banks differ from person to person, based on several factors like the borrower’s CIBIL score. This score reflects the creditworthiness of the borrower and their ability to repay loans.

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*All rates are as on 26th Feb 2025. For the latest and most accurate information on interest rates, do refer to individual bank websites.