India’s largest lender, State Bank of India (SBI), has moved swiftly to pass on the Reserve Bank of India’s latest repo rate cut to borrowers. On Friday, SBI announced a 50 basis points reduction in its External Benchmark Lending Rate (EBLR) and home loan interest rates, effective June 15, 2025.
This move comes in response to the RBI’s decision to cut the policy repo rate by 50 bps, as the central bank looks to stimulate economic growth amid a declining interest rate environment.
📉 What’s Changing?
- EBLR (External Benchmark Lending Rate):
- Old Rate: 8.65%
- New Rate: 8.15%
- Home Loan Rates (linked to EBLR):
- Revised Range: 7.5% – 8.45%
- Varies based on borrower’s credit score
According to SBI’s updated website, borrowers with stronger credit profiles will benefit from lower interest rates.
“We have passed the entire repo rate cut to our borrowers,” a senior SBI executive confirmed.
💰 What About Deposit Rates?
While borrowers cheer the rate cut, depositors may face disappointment:
- Special Deposit Scheme – ‘Amrit Vrishti’ (444 days):
- Interest rate reduced by 25 bps
- New Rate: 6.60% (down from 6.85%)
- Effective June 15, 2025
Other domestic retail term deposit rates (below ₹3 crore) remain unchanged for now. However, SBI had already trimmed term deposit rates across maturities by 20 bps last month, and a further review is underway.
🏦 Why It Matters: The EBLR Explained
SBI’s lending rates are linked to the EBLR, which is pegged to the RBI’s repo rate. This ensures quicker transmission of monetary policy changes to end borrowers. The EBLR also includes:
- Credit Risk Premium – based on the borrower’s credit profile
- Business Strategy Premium – based on SBI’s internal pricing strategy
📊 What Does This Mean for the Banking Sector?
According to a report from CareEdge Ratings:
- Deposit growth remains competitive, especially for low-cost Current and Savings Accounts (CASA)
- Banks lowering deposit rates may see a lagged impact on deposit costs over the next 2–3 quarters
- This could squeeze Net Interest Margins (NIMs) in FY26
CareEdge estimates NIMs may decline by 20–25 basis points in FY26 compared to FY25, as falling yields on loans could outpace the decline in deposit costs.
🧾 Takeaway for Borrowers and Depositors
- Home loan borrowers: This is a good time to review your current rates and consider refinancing if you’re paying more than the revised range.
- Depositors: Interest rates are under pressure, especially for medium-term deposits. Consider shorter tenures or alternatives like debt mutual funds if you’re seeking better yields.
- Investors in bank stocks: Keep an eye on NIM pressures in FY26 as rate transmission accelerates.
Final Word: SBI’s move is a clear signal that the Indian banking system is responding quickly to the RBI’s monetary easing. While borrowers benefit immediately, depositors and bank margins could feel the heat in the coming quarters.
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