The country’s three major government banks have given good news to customers. These public sector banks—Punjab National Bank (PNB), Indian Bank,
and Bank of India—have reduced their MCLR (Marginal Cost of Funds-based Lending Rate) by 5 basis points (bps) at the start of July. A cut of 5 basis points means an interest rate reduction of 0.05%.
This rate cut comes after the Reserve Bank of India (RBI) reduced the repo rate by a total of 100 basis points, or 1%, since February 2025. With this move, loan interest rates may come down, providing some relief to borrowers through lower EMIs.
What is MCLR?
MCLR is the lowest interest rate at which banks are allowed to lend. It sets the minimum rate limit for loans. Banks cannot offer loans at rates below the MCLR unless the RBI gives special permission. Now, the three large public sector banks have reduced their MCLR.
PNB Cuts Loan Interest Rates
Punjab National Bank (PNB), the second-largest public sector bank in India, has reduced its MCLR by 5 bps across all tenures:
Overnight MCLR: From 8.25% to 8.20%
One Month: From 8.40% to 8.35%
Three Months: From 8.60% to 8.55%
Six Months: From 8.80% to 8.75%
One Year (for home loans): From 8.95% to 8.90%
Three Years: From 9.25% to 9.20%
Indian Bank’s New Rates
Indian Bank has also reduced MCLR by 5 bps for select tenures. These rates are effective from July 3:
Overnight MCLR: No change, remains at 8.20%
One Month: From 8.45% to 8.40%
Three Months: From 8.65% to 8.60%
Six Months: From 8.90% to 8.85%
One Year: From 9.05% to 9.00%
Bank of India Also Slashes Rates
Bank of India has reduced MCLR by 5 bps across all loan tenures from July 1, 2025:
Overnight: From 8.15% to 8.10%
One Month: From 8.45% to 8.40%
Three Months: From 8.60% to 8.55%
Six Months: From 8.85% to 8.80%
One Year: From 9.05% to 9.00%
Three Years: From 9.20% to 9.15%
EMI Relief for Borrowers
With this reduction in MCLR, EMIs for borrowers may come down slightly. This is especially helpful for people whose loans are directly linked to MCLR. After RBI’s decision to cut the repo rate, these rate cuts by banks are expected to offer major relief to customers.
