Loan Interest Rates May Fall as RBI Pushes Banks on Repo Cuts

Mumbai, 26th June 2025: The Reserve Bank of India (RBI) has urged banks to ensure that customers benefit from recent repo rate reductions without delay. In its June 2025 bulletin, the central bank highlighted that the prevailing financial conditions remain conducive for further interest rate cuts.

The bulletin article, titled ‘State of the Economy’, noted that many banks, including State Bank of India (SBI), Bank of Baroda, and HDFC Bank, responded swiftly to the 50 basis point repo rate cut announced on June 6 by passing on the benefits to borrowers within days.

This comes after the RBI slashed the repo rate by a total of 50 basis points in earlier rounds during February and April this year. Additionally, the central bank reduced the cash reserve ratio (CRR) by 100 basis points in phases, aimed at infusing liquidity into the banking system. The CRR cut is expected to inject around ₹2.5 lakh crore into the system by December 2025.

The RBI bulletin clarified that the views expressed in the article reflect the authors’ opinions and not necessarily the central bank’s official stance. However, the data presented underscores a clear trend: banks are gradually aligning their lending rates with the benchmark rate reductions.

According to the bulletin, the benefits of repo rate cuts are now visible in both the External Benchmark Lending Rate (EBLR) and the Marginal Cost of Funds-Based Lending Rate (MCLR). As a result, banks’ weighted average lending rates (WALR) on new loans dropped by six basis points, while rates on outstanding loans fell by 17 basis points during February to April 2025.

The RBI’s messaging signals continued policy support for easing borrowing costs, aiming to stimulate credit demand and economic growth amid a moderate inflation outlook.

Key Highlights:
RBI reiterates that financial conditions are favorable for interest rate reductions.
Major banks have already passed on the June 6 repo rate cut to customers.
CRR cuts to inject ₹2.5 lakh crore liquidity by year-end.
Lending rates show a downward trend, enhancing credit flow into the economy.
The central bank’s reminder comes at a time when retail borrowers and industries are closely watching lending trends, hoping for lower EMIs and improved credit availability.