The country’s largest lender, State Bank of India (SBI), has reduced its interest rates by 25 basis points (bps) following the Reserve Bank of India’s (RBI) policy rate cut, making loans cheaper for existing and new borrowers. With the 25 basis point reduction, SBI’s external benchmark-linked interest rate (EBLR) will be 7.90 percent. This reduction will be effective from December 15, 2025, and comes following the RBI’s decision to support growth.
SBI Makes Major Interest Rate Changes
SBI has also reduced its MCLR (Marginal Cost of Funds-based Lending Rate) by 5 basis points across all tenors. With this change, the MCLR for one-year maturities will fall to 8.70 percent from the current 8.75 percent. The bank announced that it has also reduced its base rate/BPLR from the current 10% to 9.90%, effective December 15.
However, SBI has reduced the interest rate on fixed deposits (FDs) with maturities ranging from 2 years to at least 3 years by 5 basis points to 6.40%. However, the bank has kept interest rates on other maturity schemes unchanged, indicating pressure on deposit collection. The interest rate on the special 444-day scheme ‘Amrit Varshi’ has also been revised from 6.60% to 6.45%, effective December 15.
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IOB also provided major interest relief
Another public sector bank, Indian Overseas Bank (IOB), has also announced a reduction in its lending rates, effective December 15, 2025. The bank has reduced its EBLR, specifically the repo-linked lending rate (RLLR), by 25 basis points from 8.35 percent to 8.10 percent. IOB stated that the full benefit of the repo rate cut is being passed on to customers. Additionally, the bank has approved a 5 basis point reduction in the MCLR for all tenors ranging from three months to three years.
Significant Benefits to Customers
The banks stated that these revisions will reduce EMIs for existing and new borrowers whose loans are linked to these benchmarks. Retail customers will benefit from increased affordability in home loans, vehicle loans, and personal loans. MSME and corporate borrowers will also experience a reduction in the cost of funds, which will help meet working capital needs and support business growth.
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