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Despite Reserve Bank of India’s repo rate cut to 5.5 per cent, aimed at easing borrowing costs, India’s largest mortgage lender, State Bank of India (SBI), has increased home loan rates by 25 basis points for new borrowers.
The bank raised the upper band of interest rates by 25 basis points.
SBI’s interest rates for home loans have increased from the earlier band of 7.50 per cent-8.45 per cent to a new band of 7.50 per cent-8.70 per cent. The new rates will particularly impact customers with low credit scores, as the maximum interest rate limit has been raised.
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Other banks’ lending rates
Public sector banks like Union Bank of India, Bank of India, Bank of Maharashtra, and Central Bank of India offer loans starting at 7.35 per cent and going up to 10.10 per cent or more, depending on the borrower’s credit profile. Market experts suggest that other public sector banks may follow SBI’s lead, as per IANS report.
The repo rate was cut three times consecutively to provide relief to the public. The reduction in the repo rate by the RBI generally leads to lower interest rates on loans, including home loans, benefiting the public indirectly.
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Loans linked to EBLR
The change will be felt most immediately in loans linked to the External Benchmark Lending Rate (EBLR), which account for around 60 per cent of all loans given by Scheduled Commercial Banks (ASCBs), according to data compiled by SBI Research.
As of August 2025, SBI home loans are predominantly linked to the EBLR for new borrowers, aligning with the RBI’s repo rate plus a spread. Looking ahead, SBI warned that although lower rates benefit borrowers, banks might continue to face pressure on their profit margins.
(With inputs from IANS)
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