SBI Cuts Lending Rates After RBI Move, Cheaper Loans From December 15; IOB Follows Suit

India’s largest lender, State Bank of India (SBI), has announced a fresh round of lending rate cuts, passing on the Reserve Bank of India’s latest policy easing to borrowers and signalling improved credit affordability across retail and business segments.

The reductions, effective December 15, 2025, will lower loan costs for both existing and new customers, particularly those with home, vehicle, personal, and MSME loans.

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Key Rate Cuts by SBI

In a statement, SBI said it has reduced its External Benchmark Linked Rate (EBLR) by 25 basis points to 7.90%, directly reflecting the RBI’s recent policy rate cut.

The bank has also trimmed its Marginal Cost of Funds-Based Lending Rate (MCLR) by 5 basis points across all tenures. As a result:

• The one-year MCLR now stands at 8.70%, down from 8.75%.

• Other long-term lending benchmarks have also seen modest reductions, easing borrowing costs for longer-tenure loans.

Additionally, SBI has lowered its Base Rate/BPLR to 9.90%, from 10%, aligning legacy loan products with the broader easing cycle.

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Impact on Deposits

On the deposit side, SBI announced a 5-basis-point cut in fixed deposit rates for tenures ranging from two years to less than three years, bringing the rate down to 6.40%.

The popular special-tenure deposit scheme ‘Amrit Vrishti’ (444 days) has also seen its rate reduced from 6.60% to 6.45%.

However, deposit rates for other maturities remain unchanged, suggesting that banks are facing continued pressure to attract deposits even as lending rates decline.

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Why the Cuts Matter

The move follows the RBI’s decision last week to cut the policy repo rate by 25 basis points, marking the fourth rate reduction in 2025. The central bank has signalled a clear focus on supporting economic growth amid moderating inflation and uneven global conditions.

For borrowers, the cuts translate into:

• Lower EMIs for loans linked to EBLR and MCLR

• Improved affordability for homebuyers and vehicle purchasers

• Reduced financing costs for MSMEs and corporates, supporting working capital needs and expansion plans

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Indian Overseas Bank Also Passes on Rate Cut

State-owned Indian Overseas Bank (IOB) also announced lending rate reductions effective December 15.

According to an official statement:

• IOB cut its Repo Linked Lending Rate (RLLR) by 25 basis points, from 8.35% to 8.10%, fully passing on the RBI’s policy easing.

• The bank’s Asset Liability Management Committee (ALCO) approved a 5-basis-point reduction in MCLR for tenures ranging from three months to three years.

IOB said the changes would lower EMIs for existing borrowers and make new loans more affordable across retail, MSME, and corporate segments.

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Broader Banking and Economic Context

Banking analysts note that while lenders are increasingly transmitting RBI rate cuts to borrowers, deposit-side rigidity remains a challenge due to intense competition for savings. This could limit the pace of future rate reductions unless liquidity conditions ease further.

Still, the latest moves by SBI and IOB reinforce expectations that credit growth will accelerate, supporting consumption and investment as India enters the next phase of its economic cycle.

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What Borrowers Should Know

Customers with floating-rate loans linked to EBLR or MCLR should see automatic EMI reductions or shorter loan tenures, depending on loan terms. Borrowers are advised to check revised repayment schedules from December 15 onward.