Relief Alert! Home Loan EMIs to Dip at BoB, PNB & Canara for These Tenures

In a welcome move for borrowers, three major Public Sector Banks (PSBs)—Bank of Baroda (BoB), Punjab National Bank (PNB), and Canara Bank—have reduced their Marginal Cost of Funds-based Lending Rates (MCLR) for specific loan tenures. 

For the uninitiated, the Marginal Cost of Funds-Based Lending Rate (MCLR) is the minimum interest rate that a financial institution must charge for a particular loan. This change is expected to offer relief in the form of lower EMIs for home loan customers whose loans are linked to the MCLR framework.

The MCLR cut comes as the banks adjust to stable monetary policy conditions. Although the reduction is marginal, it could still bring some financial breathing room to borrowers.

Also Read: Home Loans in India: A Comprehensive Guide for Potential Home Buyers | Republic World

Which banks have slashed rates?

Bank of Baroda (BoB) has lowered its one-year MCLR by 5 basis points to 8.60%, effective May 12. Similarly, Punjab National Bank (PNB) has brought down its one-year MCLR by 5 basis points to 8.65%, effective May 11. On Similar lines, Canara Bank also reduced its one-year MCLR by 5 basis points, now at 8.65%, with the revised rate taking effect from May 7.

The one-year MCLR is crucial, as it serves as the benchmark for pricing most retail loans, including older home loans sanctioned before October 2019.

Who are the beneficiaries?

Borrowers with home loans linked to the MCLR regime—particularly those nearing their reset date—will see a modest drop in their monthly instalments. However, this change does not impact those whose loans are linked to the RBI’s external benchmark rates, such as the repo rate, which has remained unchanged for over a year.

Key takeaway 

While the cut in MCLR is not drastic, it indicates a softening interest rate trend amid a stable rate environment. For new borrowers or those considering switching their loan terms, this could be an opportune time to reassess borrowing options.