When you take a home loan, you usually focus on the interest rate you will pay. But behind that figure is a powerful lever called the Repo Rate, which is set by the Reserve Bank of India (RBI).

The repo rate is the rate at which the RBI lends money to commercial banks like SBI. When this rate goes down, borrowing becomes cheaper for banks—and ideally, they pass on this benefit to customers through lower loan interest rates.

But there’s a difference between the repo rate and the loan interest rate you are charged. Refer to this table to understand the difference:

Repo Rate	Interest Rate on Loans
Set by the RBI	Set by commercial banks based on internal cost structures
Influences borrowing cost for banks	Final cost borne by retail borrowers like you
Currently at 5.50% after 50 bps cut	Varies across banks and loan types

In line with the 50 basis points (bps) repo rate cut announced by the RBI on June 6, 2025, the State Bank of India (SBI) has responded by reducing its lending rates. This move aims to ease the repayment burden for existing borrowers and offer cheaper credit to new ones.

MCLR vs EBLR: What’s the Difference?

When it comes to loan interest rates, you may have heard terms like MCLR and EBLR. These are simply different ways banks calculate the interest on your loan.

MCLR (Marginal Cost of Funds Based Lending Rate)	EBLR (External Benchmark Lending Rate)
Based on the bank’s internal cost of funds	Linked directly to an external benchmark (like repo rate)
Less transparent, slower to respond to repo changes	Automatically adjusts with changes in repo rate
Common for older home loans	Mandatory for loans sanctioned after October 2019

In short, EBLR moves faster with RBI’s rate cuts or hikes, while MCLR adjusts more slowly.

Read More – SBI vs HDFC vs ICICI: Who Offers the Cheapest Personal Loan in 2025

SBI Cuts Down MCLR and EBLR for Home Loans

Following the repo rate cut, SBI has reduced both its MCLR and EBLR-linked home loan interest rates. Here’s what the changes look like:

1-year MCLR reduced from 9.40% to 9.10%
EBLR slashed from 8.65% to 8.15%

Let’s understand the impact through an example.

Suppose Ravi took a home loan of ₹50 lakh for 20 years at an interest rate of 12% (prior to the rate cut).

Here’s how Ravi’s monthly EMI and total interest would change with the new reduced rates:

Interest Rate	Monthly EMI	Total Interest Over 20 Years	Savings Compared to 12%
12.00%	₹55,000	₹82.06 lakh	—
9.10%	₹45,264	₹58.63 lakh	₹23.43 lakh
8.15%	₹42,181	₹51.23 lakh	₹30.83 lakh

So, if you were in Ravi’s place, would you pay an extra ₹30 lakh to your private bank? If not, then consider refinancing your loan with SBI bank.

2 Options After Interest Rate Reduction

Now that interest rates are lower, Ravi—and borrowers like him—have two clear choices:

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Reduce EMIs
Reduce Loan Tenure

Option	What It Means	Pros	Cons
Lower the EMIs	Monthly outgo reduces, tenure remains the same	More disposable income each month	Higher total interest paid in the long run
Lower the Loan Tenure	Keep EMI the same, repay loan faster	Huge savings on total interest paid	Monthly financial burden remains unchanged

Always remember your financial goal before choosing from the 2 options.

Conclusion

SBI’s move to cut both MCLR and EBLR-linked loan rates is a direct relief to thousands of home loan borrowers, especially after the RBI’s 100 bps repo rate cut action. For borrowers, it’s the perfect time to review their home loan structures, consult with their bank, and decide whether to lower their EMIs or reduce the loan tenure.

Either way, smart borrowers can now turn the rate cut into real savings.

Stay tuned for more updates as other banks follow the trend!

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