Home loan borrowers have received a welcome relief as several leading banks in India have announced reductions in their home loan interest rates. This move is set to lower the EMI burden for borrowers or shorten the loan repayment period. Some of the key banks implementing this rate reduction include Canara Bank, Punjab National Bank (PNB), Union Bank of India, Bank of Baroda, Bank of India, and Indian Overseas Bank.
Impact of RBI’s Repo Rate Cut
The interest rate cuts by banks come in the wake of the Reserve Bank of India (RBI) reducing the repo rate by 25 basis points. On February 7, 2025, the RBI’s Monetary Policy Committee (MPC) announced a repo rate reduction from 6.5% to 6.25%. This move made borrowing cheaper for banks, enabling them to offer home loans at lower interest rates to customers.
Banks That Have Reduced Home Loan Interest Rates
Following the RBI’s decision, several banks revised their Repo Linked Lending Rates (RLLR). Here are the latest updates:
- Canara Bank: RLLR reduced from 9.25% to 9.00%, effective from February 12, 2025.
- Bank of Baroda: New RLLR set at 8.90%, applicable from February 10, 2025.
- Bank of India: Interest rate cut from 9.35% to 9.10%, effective from February 7, 2025.
- Union Bank of India: RLLR lowered from 9.25% to 9.00%, effective from February 11, 2025.
- Punjab National Bank (PNB): RLLR reduced from 9.25% to 9.00%, effective from February 10, 2025.
- Indian Overseas Bank: RLLR decreased from 9.35% to 9.10%, effective from February 11, 2025.
Understanding RLLR
The Repo Linked Lending Rate (RLLR) is the interest rate banks charge on loans, directly linked to the RBI’s repo rate. This system was introduced in October 2019 when the RBI directed banks to align their retail loans with an external benchmark like the repo rate. As a result, when the repo rate changes, home loan interest rates linked to RLLR fluctuate accordingly. Most home loans in India operate on a floating interest rate system tied to RLLR.
Impact on New and Existing Borrowers
The rate cut will benefit new borrowers immediately, as they can secure home loans at lower interest rates. Existing borrowers with RLLR-linked loans will also benefit, but only when their interest rates are revised—usually every three to six months, depending on their loan agreement.
Is This the Right Time to Take a Home Loan?
For those considering a home loan, this could be an opportune time. With reduced interest rates, borrowers can enjoy lower EMIs or opt for a shorter repayment tenure. Additionally, banks often introduce competitive offers to attract new customers, making it even more favorable for prospective home buyers.
