Repo Rate Cut: RBI’s Gift! 4 Major Banks Reduced Interest Rates, Your EMI Will Decrease
Repo Rate Cut: Following the Reserve Bank of India’s (RBI) recent decision to cut the repo rate, borrowers have received encouraging news from four major banks in the country. On December 5, the RBI decided to reduce the repo rate by 25 basis points, bringing it down from 5.5% to 5.25%. Immediately following this announcement, four large public and private sector banks announced reductions in their Repo-Based Lending Rates (RBLR) and benchmark rates. This move will lower interest rates on long-term loans like home loans and ease the EMI burden on common people.
Which Banks Reduced Interest Rates?
Following the RBI’s directive, Bank of Baroda, Indian Bank, Bank of India, and Karur Vysya Bank have reduced their interest rates. The details are discussed below:
1. Bank of Baroda (BoB):
State-owned Bank of Baroda has reduced the interest rate on its repo-linked loans by 0.25%. As a result, the Baroda Repo Linked Lending Rate (BRLLR) has come down to 7.90% from the current 8.15%. This new rate has been effective from December 6.
2. Indian Bank:
Indian Bank has also reduced its repo-linked benchmark lending rate from 8.2% to 7.95%. According to the bank, these new interest rates have been made effective from December 6.
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Join on Telegram3. Bank of India (BoI):
In line with the RBI’s decision, Bank of India has reduced its Repo-Based Lending Rate (RBLR) by 25 basis points to 8.1%. In a stock exchange filing, the bank stated that these new rates are effective from December 5.
4. Karur Vysya Bank:
Private sector lender Karur Vysya Bank has reduced its External Benchmark Rate (EBR-R) by 0.25%. Consequently, the interest rate has come down from 8.80% to 8.55%. The new rates are effective from December 6.
New Interest Rates at a Glance:
| Bank Name | New Interest Rate | Effective Date |
|---|---|---|
| Bank of Baroda | 7.90% | December 6 |
| Indian Bank | 7.95% | December 6 |
| Bank of India | 8.10% | December 5 |
| Karur Vysya Bank | 8.55% | December 6 |
What is Repo Rate?
The repo rate is the interest rate at which commercial banks borrow money from the RBI. When banks face a cash shortage, they borrow from the RBI by pledging government bonds. If the RBI reduces the repo rate, banks get loans at a cheaper rate and can subsequently offer loans to customers at lower interest rates.
What is RLLR?
The Repo-Linked Lending Rate (RLLR) is an interest rate that is directly linked to the RBI’s repo rate. In October 2019, the RBI mandated that banks must link their retail loans to an external benchmark. As a result, when the repo rate increases or decreases, the interest rate on the customer’s loan is directly affected.
How Will Your EMI Decrease?
If your loan is linked to the repo rate (RLLR based), you will receive a direct benefit from this rate cut. Banks typically pass on this benefit in two ways:
- By reducing your monthly installment or EMI amount.
- Or, by reducing the loan tenure (duration).
If the bank automatically reduces the tenure but you want your monthly EMI amount to decrease instead, you can request the bank to make that change.
