HDFC, BoB, and Others Slash Loan Rates After RBI Move — Borrowing Just Got Cheaper

HDFC, BoB, and Others Slash Loan Rates After RBI Move — Borrowing Just Got Cheaper is the headline that is making headlines after the Reserve Bank of India (RBI) surprised many on June 6, 2025 by cutting its repo rate by 50 basis points (0.50%), lowering it from 6.00% to 5.50%. At the same time, the RBI also reduced the Cash Reserve Ratio (CRR) by 100 basis points (1%), bringing it down from 4.00% to 3.00%. Together, these moves released about ₹2.5 lakh crore of extra funds into the banking system, helping banks to lend more and cheaper.

On June 7, 2025, major lenders like HDFC Bank, Bank of Baroda (BoB), Punjab National Bank (PNB), Bank of India (BOI), and Indian Bank swiftly announced cuts in their lending rates. For instance, HDFC Bank trimmed its Marginal Cost of Funds–based Lending Rate (MCLR) by 10 bps across all tenures, and BoB cut its Repo-Linked Lending Rate (RLLR) by 50 bps to 8.15%. This means the EMIs (Equated Monthly Installments) on home, auto, and personal loans will drop, saving borrowers thousands of rupees each year.

The Reserve Bank of India has cut its repo rate by 50 basis points to 5.5%, a move that could ease EMIs for homebuyers and reduce borrowing costs for developers. RBI Governor Sanjay Malhotra reaffirmed confidence in India’s growth trajectory, citing the strength of key economic… pic.twitter.com/SG5EcTul8t

— Mid Day (@mid_day) June 6, 2025

The RBI’s 50 bps repo rate cut to 5.50% and 100 bps CRR reduction to 3.00% on June 6, 2025 highlight its focus on supporting growth while keeping inflation in check. Banks such as HDFC Bank and Bank of Baroda acted quickly to pass on these cuts, making loans more affordable for millions. Borrowers can follow our simple guide to calculate savings, consider refinancing, and use extra funds wisely. Professionals can use this opportunity to provide tailored advice, build stronger relationships, and find new growth areas.

Why Did the RBI Cut Rates?

The repo rate is the interest rate at which the RBI lends money to banks, usually overnight. When this rate comes down:

1. Banks borrow cheaper from the RBI.
2. Banks lend cheaper to customers.
3. Borrowers pay less interest in their EMIs.

The Cash Reserve Ratio (CRR) is the share of deposits banks must keep with the RBI. Lowering the CRR:

• Frees up more cash for banks to lend.
• Boosts credit availability for homes, cars, and businesses.

On June 6, 2025, the RBI made these changes because:

• Inflation had eased to around 4%, near the lower end of its comfort zone.
• Economic growth slowed to 6.5% in FY24-25, its slowest in four years.
• Global challenges, like higher oil prices and supply chain issues, needed a growth push.

With cheaper loans, the RBI hopes to:

• Encourage consumer spending on homes, vehicles, and durable goods.
• Support businesses, especially small and medium enterprises (SMEs), to expand.
• Keep inflation in check by balancing demand and supply.

Which Banks Cut Their Rates and by How Much?

Banks usually link loan rates to either MCLR or an external benchmark like RLLR. Here’s how some key lenders passed on the RBI’s rate cut:

HDFC Bank: MCLR Cuts

• Old MCLR Band: 9.00%–9.20%
• New MCLR Band: 8.90%–9.10% (10 bps cut across tenures)

Affected Loans: Home, auto, personal loans tied to MCLR.

Borrowers will see their new EMI or shorter tenure at the next reset date, which can be monthly or semi-annual. Check your bank statement or contact the bank to know your reset schedule.

Public Sector Banks: RLLR/RBLR Cuts

These banks link their rates directly to the repo rate, so the cut flows through faster, often within days.

What Borrowers Should Do: A Simple Guide

If you have a floating-rate loan, here’s how to make the most of these cuts:

1. Identify Your Benchmark: Find out if your loan is linked to MCLR or RLLR.
2. Check the Reset Date: This tells you when the new rate applies.
3. Use an EMI Calculator: Enter your principal, rate, and tenure to see new EMIs. Try tools like BankBazaar’s EMI Calculator.
4. Compare Refinancing: If your rate is still high, check offers from other banks. Remember to factor in processing and prepayment fees.
5. Talk to Your Bank or Advisor: Ask for a new amortization schedule showing your savings and any tenure changes.
6. Plan Extra Payments: Use some of your savings to make small extra payments and pay off your loan faster.

By following these steps, you can save on interest and improve your cash flow.

Impact on Businesses and the Economy

Small and Medium Enterprises (SMEs)

SMEs often rely on working capital loans. With interest costs down by up to 50 bps, businesses can:

• Reduce monthly interest outgo, freeing cash for inventory or payroll.
• Invest in growth, such as machinery upgrades or marketing.
• Improve profitability, by lowering their cost of funds.

Real Estate and Auto Sectors

• Homebuyers: Lower EMIs make buying homes more affordable, especially in smaller cities.
• Car buyers: Auto loans become cheaper, boosting car sales in rural and urban markets.

Lower rates can revive demand in these key sectors, supporting jobs and broader economic activity.

Expert Tip for Financial Professionals

As a financial advisor or bank staff, you can add value by:

• Proactive Outreach: Call or email clients soon after rate cuts to explain how it helps them.
• Customized Reports: Show each client a simple chart of old vs. new EMIs and total savings.
• Refinancing Comparison: Provide quotes from multiple banks to find the best deal.
• Cross-Sell Opportunities: Suggest savings or investment plans for the extra money clients save.

This approach strengthens client trust and uncovers new business opportunities.

Real-Life Example: The Sharma Family

The Sharma family from Jaipur took an ₹80 lakh home loan in April 2025 at a rate of 9.05% MCLR. After the June 2025 cut:

They used ₹1,800 of the monthly savings for extra principal repayment and ₹1,800 for a family emergency fund. After one year, they expect to:

• Save an extra ₹9,000 in interest due to prepayment.
• Reduce loan tenure by 4–6 months.

This illustrates how even a small rate cut can benefit families in real terms.

Historical Perspective: India’s Rate Cuts (2020–2025)

This timeline shows how the RBI uses rate tools to balance growth and inflation over time.

Risks and Things to Watch

While rate cuts are helpful, borrowers should be mindful of:

• Future rate hikes: If inflation rises, the RBI may increase rates again.
• Reset mismatch: Different loans have different reset dates—benefits may come at different times.
• Refinancing costs: Processing fees or prepayment penalties can offset savings.
• Overborrowing: Lower rates may tempt you to borrow more—keep your debt-to-income ratio in check.

Staying informed helps you enjoy benefits without unwelcome surprises.

Glossary of Key Terms

• Repo Rate: The rate at which the RBI lends to banks.
• CRR (Cash Reserve Ratio): Portion of deposits banks must hold with RBI.
• MCLR (Marginal Cost of Funds-based Lending Rate): Internal benchmark for banks’ new loans.
• RLLR/RBLR (Repo-Linked/Repo Based Lending Rate): External benchmark tied directly to the repo rate.
• EMI (Equated Monthly Installment): Fixed monthly payment combining principal and interest.

Big Change: Income Tax Bill 2025 to Tax Farming & Dairy Earnings!

Big News: India’s Largest Airport in Noida Set to Open – Check the Launch Date and Details

India Post GDS Salary in 2025: This much will the New Pay Structure and Benefits Post 8th Pay Commission

FAQs

1. What is the repo rate and why does it matter?
The repo rate is the interest rate at which the RBI lends money to banks. Lower repo rates let banks borrow cheaper and lend cheaper, reducing your loan EMIs.

2. How quickly do banks pass on rate cuts?
Private banks often adjust rates immediately, while public sector banks follow formal approval cycles, usually within 7–10 days.

3. Will fixed-rate loans benefit?
No. Fixed-rate loans have a set rate for the entire tenure and do not change with repo cuts.

4. Should I refinance after a rate cut?
If your current rate is higher than market offers, refinancing can save money. Compare total costs, including fees, before deciding.

5. How can I calculate my new EMI?
Use online EMI calculators on bank websites or portals like BankBazaar and PaisaBazaar by entering your loan amount, new rate, and remaining tenure.

6. When is the next RBI policy meeting?
The next Monetary Policy Committee meeting is scheduled for August 7–9, 2025.