In a significant move that underscores the effective transmission of monetary policy, the State Bank of India (SBI) has announced a reduction in its lending rates by 25 basis points (bps), aligning with the Reserve Bank of India’s (RBI) recent repo rate cut. This decision, effective from mid-December 2025, is expected to provide substantial relief to retail, MSME, and corporate borrowers, while also stimulating demand across key sectors of the economy.
Key Highlights of SBI’s Rate Cut
- External Benchmark Linked Rate (EBLR): Reduced by 25 bps to 7.90%, directly mirroring the RBI’s repo rate cut.
- Marginal Cost of Funds-Based Lending Rate (MCLR): Lowered by 5 bps across tenures, with the one-year MCLR now at 8.70%.
- Base Rate/BPLR: Adjusted downward to 9.90% from 10%, effective December 15, 2025.
- Deposit Rates: Retail term deposit rates (below ₹3 crore) for select tenures have also been trimmed by 5 bps, reflecting the overall easing stance.
Impact on Borrowers
- Retail Borrowers: Home loans, auto loans, and personal loans linked to EBLR will immediately become cheaper, reducing monthly EMIs and improving affordability.
- MSMEs and Corporates: Lower borrowing costs will ease financial stress, encourage expansion, and support investment in new projects.
- Transmission Efficiency: While EBLR-linked loans adjust quickly to repo rate changes, MCLR-based loans reflect changes more gradually, ensuring broader coverage over time.
Broader Economic Context
The RBI’s repo rate cut, its fourth in 2025, was aimed at supporting growth amid global uncertainties and moderating inflationary pressures. SBI’s swift action demonstrates its leadership as India’s largest lender in ensuring policy benefits reach the economy. The reduction in lending rates is expected to:
- Stimulate demand in housing, automobile, and consumer finance sectors.
- Encourage businesses to expand capacity and investments.
- Provide relief to households facing inflationary challenges.
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Conclusion
SBI’s decision to cut lending rates by 25 bps is a welcome relief for borrowers and a positive step for the economy. By aligning with the RBI’s monetary easing, the bank ensures faster transmission of policy benefits, supporting both consumer demand and business investment. This move strengthens confidence in India’s financial system and sets the stage for more inclusive growth in FY26.
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