Starting September 1, 2025, Punjab National Bank (PNB) and Bank of India (BOI) have slashed their Marginal Cost of Funds based Lending Rates (MCLR) by up to 15 basis points (bps). This move is expected to make borrowing cheaper for home, personal, education, and car loans, offering much-needed relief to customers.
What is MCLR?
The Marginal Cost of Funds based Lending Rate (MCLR) is the minimum interest rate below which a bank cannot lend (except in specific cases). When banks reduce MCLR, borrowing costs for loans linked to it—such as home loans and personal loans—come down.
New MCLR Rates (Effective September 1, 2025)
Punjab National Bank (PNB):
Reduced MCLR by up to 15 bps across tenures.
Overnight MCLR: 8.10%
One-month MCLR: 8.25%
Six-month MCLR: 8.50%
One-year MCLR: 8.70% (Benchmark rate for most retail loans)
Bank of India (BOI):
Cut MCLR by up to 10–15 bps.
Overnight MCLR: 8.15%
One-month MCLR: 8.30%
Six-month MCLR: 8.55%
One-year MCLR: 8.75%
How This Impacts Borrowers
Home Loans: EMIs may reduce slightly for borrowers with MCLR-linked loans.
Personal Loans: Borrowers may see lower interest rates, improving affordability.
Education Loans: Students and parents could benefit from reduced borrowing costs.
Car Loans: Auto buyers may enjoy better financing terms.
Business Loans: MSMEs could see reduced costs of credit, boosting liquidity.
💡 Tip: If you already have an MCLR-linked loan, your EMI reduction will reflect after your next reset date.
Why Did Banks Cut MCLR?
Lower Cost of Funds due to improved liquidity in the banking system.
Competitive Pressure as more banks adjust lending rates to attract borrowers.
Support for Growth in retail credit and MSME lending.
Monetary Policy Impact as RBI signals a softer interest rate environment.
FAQs
Q1: How much will my EMI reduce after this cut?
A 15 bps cut can lower EMIs by ₹8–₹12 per lakh for a 20-year home loan.
Q2: Does this benefit new or existing borrowers?
Both. New borrowers get lower rates immediately, while existing ones benefit at their reset dates.
Q3: Are all loans linked to MCLR?
No. Many retail loans are now linked to RBI’s Repo Rate (RLLR). Only older loans remain MCLR-linked.
Q4: Should I switch from MCLR to RLLR?
If your bank offers repo-linked loans at lower rates, switching could help reduce EMIs faster.
Q5: Will other banks also cut rates?
Yes, other PSU and private banks may follow soon to stay competitive.
Published on : 2nd September
Published by : SMITA
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