Following a 0.50% reduction in the repo rate by the Reserve Bank of India (RBI), Bank of Baroda (BOB) and HDFC Bank have offered relief to their customers. Both banks have reduced their lending rates, resulting in lower EMIs for home loan, personal loan, and auto loan borrowers. This move is considered significant in easing the financial burden on individuals and boosting economic activity.
RBI Cuts Repo Rate; Banks Respond Immediately
On Friday, the RBI took a significant step to stimulate the economy. The central bank reduced the repo rate by a substantial 0.50%, bringing it down from 6.00% to 5.50%. This exceeded expectations, triggering a positive market response. Following this decision, banks began adjusting their interest rates to make borrowing cheaper. State-owned BOB and private sector leader HDFC Bank were among the first to announce this relief.
Bank of Baroda Passes on the Entire Cut
Bank of Baroda swiftly implemented the RBI's decision, reducing its Repo Linked Lending Rate (RLLR) by the full 0.50%. BOB's new RLLR is now 8.15%, down from 8.65%, effective June 7, 2025. This directly benefits customers whose home loans, personal loans, or other loans are linked to the RLLR, leading to lower EMIs and reduced overall interest payments over the loan's lifetime.
- BOB's New RLLR:
- Previous Rate: 8.65%
- New Rate: 8.15%
- Effective Date: June 7, 2025
- HDFC Bank Cuts MCLR
HDFC Bank, a major private sector bank, also provided relief to its customers. The bank reduced its Marginal Cost of Funds based Lending Rate (MCLR) by 0.10% across various tenures.
HDFC's New MCLR Rates (Effective June 7)
Tenure Previous Rate New Rate Reduction
One Day 9.00% 8.90% -0.10%
One Month 9.00% 8.90% -0.10%
Three Months 9.05% 8.95% -0.10%
Six Months 9.15% 9.05% -0.10%
One Year 9.15% 9.05% -0.10%
Two Years 9.20% 9.10% -0.10%
Three Years 9.20% 9.10% -0.10%
This reduction by HDFC benefits customers whose loans are linked to the MCLR, such as auto loans, personal loans, and some older home loan plans.
Impact on EMIs: How Much Will You Save?
For a ₹30 lakh home loan taken for 20 years, a 0.50% reduction could result in monthly EMI savings of approximately ₹800 to ₹1,000. Furthermore, significant savings in overall interest payments over the loan tenure can be expected.
Cash Reserve Ratio (CRR) Also Reduced
Along with the repo rate, the RBI also unexpectedly reduced the Cash Reserve Ratio (CRR), making more funds available to banks for lending. This decision also aims to lower borrowing costs and increase liquidity.
What Should Customers Do?
- Review Your Loan: If your loan is still based on the base rate or older MCLR, contact your bank to request a switch to the RLLR or new MCLR.
- Consider a Top-Up Loan: Lower interest rates make top-up loans more affordable.
- Right Time for New Purchases: If you are planning a large purchase like a house or car, this is a favorable time to take out a loan.
- Plan Your EMI: Re-budget your monthly expenses based on the new EMI amount.
