Big banks like State Bank, HDFC, Punjab National Bank, and Bank of Baroda have reduced their loan interest rates. This means that from now on, the EMI you have to pay will be reduced, saving you some money every month.
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Bank Interest Rates: Do you have a home loan? Are you struggling to pay huge EMIs every month? But there is good news for you. Big banks like State Bank of India (SBI), HDFC Bank (HDFC), Punjab National Bank (PNB), Bank of Baroda (BoB), Indian Overseas Bank (IOB) have reduced their loan interest rates. This means that from now on, the EMI you have to pay will be reduced, saving you some money every month. What are the latest interest rates? How much money will you save? Let’s see now.
The Reserve Bank of India (RBI) has not changed the repo rate. But banks are now sharing the benefits of the previous adjustments with their customers. As a result, they are reducing their interest rates.
Who benefits?
Not all home loan customers will benefit. This rate cut will apply to loans linked to MCLR (Marginal Cost of Funds Based Lending Rate). This means that before 2019, banks used MCLR to determine loan interest rates. MCLR can be considered as the bank’s own ‘operating cost’. Your loan interest rate will depend on this cost.
From 2019, new loans are linked to EBLR (External Benchmark Lending Rate). This follows the RBI repo rate. EBLR is like a ‘government rate’ that changes when the RBI adjusts its rates. If your loan is on EBLR, the new interest rate cut will not apply.
Which banks have cut rates?
These are the major banks that have cut interest rates in August 2025..
State Bank: New rates are 7.90% to 8.85%, down by 0.05%. Effective from August 15, 2025.
Bank of Baroda: New rates are 7.95%– 8.80%, down by 0.10%– 0.35%. Effective from August 12, 2025.
Punjab National Bank: New rates are 8.15%– 9.15%, down by 0.05%. Effective from August 1, 2025.
Canara Bank: New rates are 7.95%– 8.95%, no change. Effective from August 12, 2025.
HDFC Bank: New rates 8.55%- 8.75%, minor reduction. Effective from August 7, 2025.
Indian Overseas Bank: New rates range from 8.05% to 8.90%. Reduced by 0.10%. Effective from August 15, 2025.
These cuts may seem small. But they will save a lot of money for long-tenure home loans.
How much will your EMI reduce?
A small rate reduction like 0.05% or 0.10% can save you a lot. This is because the tenure of home loans is very long. For example, let’s say you have taken a home loan of Rs. 30 lakh for 20 years at an interest rate of 9.00%. Your EMI will be Rs. 26,992. If you reduce the bank rate by 0.05%, your new rate will be 8.95%. Now your EMI will be Rs. 26,894.
Now you will save Rs.98 per month, Rs.1,176 per year. If you look at the same over 20 years, you will save Rs.23,520. If the rate reduction is 0.10%, your savings can almost double. It is possible to save more than Rs.47,000 over the entire tenure.
What should you do?
Don’t wait for the bank to automatically reduce your EMI. Check your loan documents to see if your loan is linked to MCLR or EBLR. MCLR loan rates don’t change immediately. They are usually updated every 6 months or 1 year on a ‘reset date’. Ask your bank when your reset date is to know when your EMI will be reduced.
If you want, you can convert your MCLR loan to EBLR. EBLR follows the RBI repo rate, so if the RBI reduces rates, your EMI will immediately decrease. Similarly, if the RBI increases rates, your EMI will immediately increase. MCLR rates change somewhat slowly.
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