In October 2025, several major banks in the country provided significant relief to their customers. They reduced their Marginal Cost of Funds-Based Lending Rate (MCLR). This decision will directly benefit millions of customers who have taken out floating-rate loans. After the Reserve Bank of India (RBI) kept the repo rate stable at 5.50% in its October meeting, banks revised the MCLR to provide relief to retail customers.
What is MCLR, and how does it affect your EMI
MCLR stands for Marginal Cost of Funds Based Lending Rate, and it is the minimum rate at which banks lend to their customers. When MCLR is reduced, the monthly installment (EMI) of a floating-rate loan may decrease, or the loan term may be shortened.
Although new floating rate loans are now typically linked to the EBLR (External Benchmark Linked Lending Rate), existing loan customers linked to the MCLR receive the direct benefit of this reduction. The effect of the change in MCLR begins from the reset date of the loan. Three major banks in the country have given a significant gift to their customers by reducing interest rates.
New MCLR Rates of Bank of Baroda (BoB)
Bank of Baroda has revised its MCLR rates effective October 12, 2025. The one-month MCLR has been reduced from 7.95% to 7.90%. Similarly, the six-month MCLR has been reduced from 8.65% to 8.60%, and the one-year rate has been reduced from 8.80% to 8.75%. However, overnight and three-month rates remain unchanged.
IDBI Bank Cuts Interest Rates
IDBI Bank has also cut some of its MCLR rates. The overnight MCLR has been reduced from 8.05% to 8%, and the one-month MCLR has been reduced from 8.20% to 8.15%. However, the three-month, six-month, and one-year rates remain unchanged. The one-year MCLR remains at 8.75%.
Indian Bank Also Provides Relief
Indian Bank has also provided significant relief to its customers. The bank has reduced the overnight MCLR from 8.05% to 7.95%, while the one-month MCLR has been reduced from 8.30% to 8.25%. The three-month, six-month, and one-year rates remain unchanged at 8.45%, 8.70%, and 8.85%, respectively.
Who will directly benefit from this reduction
This reduction in MCLR is a major boon for millions of customers whose loans are linked to MCLR. As banks revise their MCLR rates, existing customers’ EMIs are directly impacted, although this impact will only be visible after the reset period specified in their loan agreement. This move will help ease the burden on customers’ pockets during the festive season and boost loan demand in the economy.