On April 9, the Reserve Bank of India (RBI) announced a reduction in interest rates, which was swiftly followed by four major government banks lowering their lending rates. This move is set to ease the financial burden on individuals by reducing interest payments on loans such as home and car loans, and by lowering existing EMIs. The four public sector banks making the rate cuts include Punjab National Bank, Bank of India, Indian Bank, and UCO Bank, with reductions of up to 0.25 percent. Both new and existing borrowers at these banks stand to benefit from the lowered rates. More banks are expected to announce similar adjustments in the near future. Earlier, the RBI had reduced the key policy rate, the repo rate, by 0.25 percent, bringing it down to 6.0 percent.
For example, say, you took a Rs 15-lakh home loan at an interest rate of 8.25% for a 20-year tenure, and after the recent repo rate cut, your interest rate reduces to 8%. In this case, if you choose to lower your monthly EMI, it would decrease from Rs 56,944 to Rs 55,750, resulting in monthly savings of Rs 1,194. Over the loan tenure, this would amount to an interest savings of approximately Rs 2.87 lakh.
In separate announcements to the stock markets, the public sector banks confirmed that they had revised their loan rates in line with the RBI’s reduction in the short-term lending rate (repo rate). Indian Bank, based in Chennai, revealed that its repo-linked standard lending rate (RBLR) would be lowered by 35 basis points to 8.70 percent, effective April 11. Punjab National Bank (PNB) stated that its RBLR would be reduced from 9.10 percent to 8.85 percent, effective Thursday. Bank of India also adjusted its RBLR to 8.85 percent from 9.10 percent, with the new rate taking effect on Wednesday. UCO Bank has reduced its lending rate to 8.8 percent, effective Thursday. RBI Governor Sanjay Malhotra made the announcement of the repo rate cut on April 9, marking the first reduction in five years since the previous one in February.