Two of the country’s largest public sector banks — Punjab National Bank (PNB) and Bank of India (BoI) — have reduced interest rates on loans.
This move comes after both banks cut their Marginal Cost of Funds Based Lending Rates (MCLR) at the start of September 2025.
As a result, interest rates on home loans, car loans, and personal loans will come down slightly.
The new rates came into effect from September 1, 2025, providing some relief to borrowers whose loans are linked to MCLR.
Why the Cut?
Although the Reserve Bank of India (RBI) kept the repo rate unchanged at 5.5% in its August 2025 monetary policy, many banks are reducing MCLR to stay competitive and attract more customers.
PNB’s Revised MCLR Rates
Punjab National Bank has slightly lowered rates across different tenures:
Overnight MCLR: Reduced from 8.15% to 8.00%
1-Month MCLR: Reduced from 8.30% to 8.25%
3-Month MCLR: Reduced from 8.50% to 8.45%
6-Month MCLR: Reduced from 8.70% to 8.65%
1-Year MCLR: Reduced from 8.85% to 8.80%
3-Year MCLR: Reduced from 9.15% to 9.10%
Bank of India’s Revised MCLR Rates
Bank of India also cut rates on various loan tenures, except the overnight rate:
Overnight MCLR: No change, remains at 7.95%
1-Month MCLR: Reduced from 8.40% to 8.30%
3-Month MCLR: Reduced from 8.55% to 8.45%
6-Month MCLR: Reduced from 8.80% to 8.70%
1-Year MCLR: Reduced from 8.90% to 8.85%
3-Year MCLR: Reduced from 9.15% to 9.00%
Who Will Benefit From This?
This reduction in MCLR will directly benefit existing customers with floating-rate loans (such as home loans, auto loans, and personal loans) that are still linked to MCLR. Their EMIs may reduce slightly.
However, it’s important to note:
New floating-rate loans are now mostly linked to the External Benchmark Lending Rate (EBLR) instead of MCLR.
Banks give customers the option to switch from MCLR to EBLR, if they wish.
A Welcome Relief for Borrowers
This move by PNB and BoI offers some financial relief to customers, especially those who have older loans still tied to MCLR.
It may also improve borrowing conditions in the market and increase competition among banks.
