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Following the RBI's 25 bps repo rate cut, major banks like SBI and Bank of India have lowered their lending rates. SBI's Repo Linked Lending Rate is now 8.25%, while Bank of India's home loan rates start at 7.9%, depending on credit scores. Fixed deposit rates have also been trimmed by up to 25 bps, affecting small savers and retirees. HDFC and ICICI have reduced savings account rates to as low as 2.75%. Experts say cheaper loans may boost housing demand in Tier 2 and 3 cities, while depositors may need to explore better returns amid falling interest income.
Major banks have started lowering their interest rates following the Reserve Bank of India's (RBI) recent decision to cut the repo rate by 25 basis points. The country's largest public sector lender, State Bank of India (SBI), has reduced its key lending rates, making home, car, and personal loans slightly cheaper for new and existing customers. Advertisement
Starting April 15, SBI's Repo Linked Lending Rate (RLLR) will stand at 8.25%, while its External Benchmark Based Lending Rate (EBLR) has dropped to 8.65%. This adjustment means that borrowers may see a small reduction in their loan EMIs, especially for loans that are linked to these benchmarks. Following suit, Bank of India also announced a 25 basis point cut in its home loan rates, bringing them down to 7.9% per annum, depending on the borrower's CIBIL score.
This marks the second consecutive repo rate cut by the RBI, a signal that the central bank wants to boost lending and economic activity at a time when global trade tensions and inflation uncertainties remain high. While the actual benefit to consumers will depend on their individual bank's lending model and timing of interest reset, it's a step in the direction of making credit cheaper.
While borrowers may welcome the rate cut, it brings a mixed picture for depositors. SBI has also reduced interest rates on its fixed deposits by 10-25 basis points. For example, the interest on 1-2 year deposits up to INR 3 crore has been lowered to 6.70% from 6.80%. Longer-term FDs of 2-3 years now offer 6.90%, down from 7%.
In the private sector, HDFC Bank has brought down its savings account interest rate to 2.75% for balances under INR 50 lakh-the lowest among major private lenders. This comes after similar cuts by ICICI Bank earlier this year. These changes are important for households relying on interest income, especially senior citizens.
To attract long-term deposits, SBI is continuing with its special schemes like the 'Amrit Kalash' (444 days) at 7.05% and green rupee term deposits for specific durations. Senior citizens earn a slightly higher return of up to 7.65% on these schemes. However, Bank of India has withdrawn its earlier 400-day special deposit offering 7.3%.
These changes also show how banks are trying to balance both sides-passing on rate cuts to borrowers while adjusting their deposit offerings to manage margins.
Experts say that lower home loan rates may boost housing demand, especially in tier 2 and tier 3 cities. Recent data from property consultants like Anarock and Knight Frank shows that affordable housing continues to drive sales. If lending rates remain under 8%, the residential real estate market could see more traction in the coming months, especially in areas like Ahmedabad, Indore, and Lucknow.
With more banks likely to follow SBI and Bank of India's lead, borrowers should review their loan terms and see if they can benefit from lower rates. Depositors, however, may need to explore better fixed-income options if they depend on interest for regular income.
Source: PTI
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