In a move that brings relief to millions of borrowers, the State Bank of India (SBI) has announced a 25 basis points (bps) reduction in its External Benchmark-based Lending Rate (EBLR) and Repo Linked Lending Rate (RLLR). Effective from February 15, 2025, this decision follows the Reserve Bank of India’s (RBI) recent repo rate cut from 6.50% to 6.25%. Here’s how this impacts your home loan EMIs, refinancing options, and broader borrowing costs.
Key Changes in SBI’s Lending Rates
SBI’s rate cuts align with RBI’s efforts to boost economic activity by making credit more affordable. Here’s a breakdown:
| Rate Type | Previous Rate | Revised Rate | Reduction |
|---|---|---|---|
| External Benchmark (EBLR) | 9.15% + CRP + BSP | 8.90% + CRP + BSP | 25 bps |
| Repo Linked Lending (RLLR) | 8.75% + CRP | 8.50% + CRP | 25 bps |
Note:
- CRP = Credit Risk Premium (varies by borrower profile).
- BSP = Bank Spread (fixed margin added by SBI).
- MCLR, Base Rate, BPLR remain unchanged.
How Will This Impact Home Loan Borrowers?
Borrowers with floating-rate loans linked to EBLR or RLLR will see immediate benefits:
- Lower EMIs: A ₹50 lakh home loan over 20 years could see EMI drop by ₹1,460/month (see table below).
- Shorter Tenure: Opt to reduce the loan term while keeping EMIs steady.
EMI Reduction Example (25 bps Rate Cut)
| Loan Amount | Previous EMI (₹) | Revised EMI (₹) | Monthly Savings | Total Interest Saved |
|---|---|---|---|---|
| ₹50 lakh | ₹46,800 | ₹45,340 | ₹1,460 | ₹3.5 lakh |
Why Did SBI Cut These Rates?
The reduction mirrors RBI’s 25 bps repo rate cut announced last week. As India’s largest lender, SBI often leads rate adjustments, prompting peers like Canara Bank, PNB, and Bank of Baroda to follow suit.
What Are EBLR and RLLR?
- EBLR (External Benchmark Lending Rate): Linked to RBI’s repo rate since October 2019. Directly impacts floating-rate home loans.
- RLLR (Repo Linked Lending Rate): Also tied to the repo rate, affecting business and personal loans.
Expert Insight:
“Borrowers with EBLR-linked loans benefit fastest from RBI’s rate cuts. MCLR-linked borrowers should consider switching to EBLR for better transparency.”
— Rajesh Sharma, Financial Analyst
What About MCLR-Linked Loans?
SBI’s Marginal Cost of Funds-based Lending Rate (MCLR) remains unchanged at 8.00–8.50%. Borrowers with MCLR-linked loans must request a switch to EBLR/RLLR to avail lower rates.
Steps to Switch Loan Benchmark:
- Submit a written application to your SBI branch.
- Pay a nominal processing fee (0.5–1% of loan amount).
- Await approval (typically 7–10 working days).
Comparison With Other Banks
Following RBI’s cue, major banks have trimmed rates:
| Bank | Rate Cut (EBLR/RLLR) | Revised Rate Range |
|---|---|---|
| Canara Bank | 25 bps | 8.75–9.25% |
| Punjab National Bank | 25 bps | 8.65–9.15% |
| Bank of Baroda | 25 bps | 8.70–9.20% |
Pro Tip: Compare rates across lenders before refinancing. Use online EMI calculators for clarity.
5 Action Steps for Borrowers
- Check Loan Agreement: Confirm if your loan is EBLR/RLLR-linked.
- Contact SBI: Inquire about EMI recalibration or tenure reduction.
- Refinance Smartly: If switching lenders, factor in processing fees and prepayment charges.
- Monitor Credit Score: A score >750 ensures eligibility for the lowest rates.
- Avoid Fixed Rates: Floating rates are better suited during rate-cut cycles.
FAQs: SBI’s Rate Cut Explained
1. Will existing borrowers benefit automatically?
Yes, if their loans are EBLR/RLLR-linked. EMIs reset quarterly or annually.
2. How much can EMI drop for a ₹30 lakh loan?
Approx. ₹876/month (20-year tenure at 8.90% vs. 9.15%).
3. Is switching from MCLR to EBLR worth it?
Yes, if remaining tenure is long. Calculate savings using SBI’s online switch calculator.
4. Are new borrowers eligible for the revised rates?
Absolutely. New home loans start at 8.50% (RLLR + CRP).
5. Will FD rates also decline?
Likely. Banks often lower deposit rates after lending rate cuts.
Long-Term Outlook
With inflation under control, analysts predict another 25 bps repo rate cut in 2025, potentially driving home loan rates below 8.25%. However, global economic uncertainties could alter this trajectory.
Final Takeaway
SBI’s rate cut is a golden opportunity for borrowers to reduce financial strain. Whether you’re a new applicant or existing customer, act now to optimize your loan terms. As always, consult a financial advisor to tailor decisions to your goals.
“In a volatile economy, flexible loans are your best ally. Seize rate cuts to accelerate debt freedom.”
— Priya Mehta, Certified Financial Planner
