The effects of the Reserve Bank of India’s repo rate cut are the SBI lending rate cut and the hovering effects on borrowers.
On April 15, 2025, in New Delhi, the sudden cut in lending rates by the State Bank of India generally brings relief to many thousands of borrowers across India. After a long time of five years, the Reserve Bank of India has cut the repo rate in its recent monetary policy statement.
SBI Cuts the EBLR and RLLR with Immediate Effect
As of April 15, 2025, the bank reduced its EBLR by 25 basis points to 8.40 percent from 8.65 percent. In another instance, the bank has also reduced the repo-linked lending rate (credit risk premium not included) from 8.50 to 8.25 percent.
Thus, these rate cuts should, in quick succession, relieve borrowers, especially those having home and auto loans linked to external benchmark rates.
The MCLR Rate Continues as Before for All Tenors
With the cut in EBLR and RLLR, the marginal cost of funds based lending rate (MCLR) of SBI’s remains unchanged for all tenor periods.
The MLCR rate stays at 8.2% for the overnight and one month, however the MLCR rate is 9.00% for one-year loans applicable for a rough number of retail loans. The rates for two and three year tenors are 9.05 and 9.10, respectively.
Sanjay Malhotra’s First Rate Cut
These measures came soon after the RBI’s policy action of reducing the repo rate by 25 bps to 6.25%. It has been under the Governorship of Sanjay Malhotra since the first term of five years after Shaktikanta Das, who emphasized the notion of inflation targeting being the bedrock of India’s monetary policy. This framework has ensured that average inflation has remained low since its initiation.
Implications for Borrowers & For the Economy
The first port of call, an immediate effect from reduced lending rates, is a reduction in the EMIs on loans for millions of borrowers, which in turn could possibly encourage demand for real estate, automobile, and consumer financing.
This also means that the RBI and major banks like SBI are committed to growth recovery for the economy through facilitating access to credit.
Analysts see a scenario of unprecedented consumer spends coming up in the next few quarters as inflation cools down and cheap borrowing counts in.
Thus the recent SBI move will act as a major shot in the arm for the Indian economy to cue in the much expected post pandemic recovery thereby laying the foundation for economic revival.
