Good news for people troubled by high loan EMIs! From September 2025, Punjab National Bank (PNB) and Bank of India (BOI) have reduced their MCLR (Marginal Cost of Funds Based Lending Rate).
This step has been taken even though the Reserve Bank of India (RBI) kept the repo rate unchanged at 5.5% in its August 2025 monetary policy.
In simple terms, while RBI didn’t change interest rates, these two banks have still provided some relief to loan customers.
What is MCLR?
MCLR (Marginal Cost of Funds Based Lending Rate) is the rate used by banks to decide interest on floating loans such as home loans, auto loans, and personal loans.
If MCLR goes down, EMIs become a little cheaper.
Nowadays, new loans are linked to EBLR (External Benchmark Lending Rate), but old borrowers with MCLR loans can shift to EBLR if they wish.
PNB Cuts Rates
PNB has reduced MCLR by up to 15 basis points across different loan tenures from September 2025. Customers with loans linked to MCLR will directly benefit.
| Tenure | Old Rate (01.08.2025) | New Rate (01.09.2025) |
|---|---|---|
| Overnight | 8.15% | 8.00% |
| 1 Month | 8.30% | 8.25% |
| 3 Months | 8.50% | 8.45% |
| 6 Months | 8.70% | 8.65% |
| 1 Year | 8.85% | 8.80% |
| 3 Years | 9.15% | 9.10% |
Bank of India Follows
BOI has also reduced rates by 5 to 15 basis points, except for the overnight tenure, which remains unchanged. This will also ease EMIs for millions of its borrowers.
| Tenure | New Rate (from 01.09.2025) |
|---|---|
| Overnight | 7.95% |
| 1 Month | 8.30% |
| 3 Months | 8.45% |
| 6 Months | 8.70% |
| 1 Year | 8.85% |
| 3 Years | 9.00% |
Impact on EMI
For example, if you have a home loan of ₹30 lakh at 8.85%, and the rate drops to 8.80%, your monthly EMI will reduce by around ₹200–300.
Long-tenure loans will show more savings.
Short-tenure loans will show smaller savings.
Borrowers with EBLR-linked loans won’t see direct benefits.
Why Did RBI Keep Repo Rate Stable?
In its August 6, 2025 MPC meeting, RBI decided to keep the repo rate unchanged at 5.5%, citing that inflation is under control.
While RBI did not cut rates, banks like PNB and BOI have independently lowered their lending rates to give relief to customers.
