Interest rates on new home loans have dipped below 7.5 percent subsequent to the Reserve Bank of India's (RBI's) 50-basis point (bps) repo rate cut on June 6, 2025. Including the two earlier rate cuts in February and April, the central bank has slashed the repo by a total of 100 bps this year.
Public sector banks (PSBs) have already reduced rates for both new and existing customers. All floating rate loans sanctioned after October 1, 2019, are linked to an external benchmark, which is the repo for most banks.
PSBs sweeten the deal
“Some PSBs have reduced their rates by as much as 1.1 percent,” points out Adhil Shetty, CEO, BankBazaar.com. A few banks are maintaining a slightly higher spread with a reduction of 90-95 basis points (bps) instead of the full 100,'' he adds. Per RBI guidelines, banks have to pass on the entire benefit of the change in the repo to existing repo-linked loans.
Hence, existing borrowers of PSBs and private banks would have already seen their loans fall by about 100 bps, or are due for a reset in the next couple of months, per the terms of their loan agreement.
According to Shetty, for new home loan customers, currently PSBs are more attractive. However, it is only a matter of time before market pressures make the rates more or less equal across lenders.
To woo homebuyers, PSBs such as Bank of Baroda (BoB) and Punjab National Bank (PNB) have also waived processing fees from July.
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Private banks slow to pass on benefits
“Some private banks have not transmitted the benefit of the 100-bps repo rate cut to new borrowers,” said Shetty.
For instance, Yes Bank and RBL Bank have not revised their new home loan rates at all. ICICI Bank’s lowest rate for new borrowers was 8.75 percent in January 2025. This has reduced by 25 bps to 8.5 percent, per BankBazaar data as on July 4, 2025. Likewise, Axis Bank has reduced its rate by 40 bps to 8.35 percent, and HDFC Bank has reduced its interest rate by 60 bps to 8.15 percent.
Banks offering the lowest rates
According to Bankbazaar.com data, interest rates for a Rs 1 crore, 20-year home loan range from 7.3 to 9 percent. These rates are indicative and may vary based on individual factors like credit score, income, and other criteria.
Canara Bank
Following a reduction of rates by 110-bps for new and existing home loan customers, Canara Bank's rate is the lowest of all, starting at 7.3 percent. The EMI for a Rs 1 crore, 20-year loan works out to Rs 79,341.
Bank of India and Indian Overseas Bank
These two banks have slashed their interest rates by 105 bps, which now start at 7.35 percent for all their home loan customers. Their EMI on a Rs 1-crore, 20-year loan works out to Rs 79,645.
Bank of Maharashtra, Central Bank of India, and Union Bank of India
These three have trimmed their interest rates -- which start at 7.35 percent -- by 100-bps for all their home loan customers. The EMI on a Rs 1-crore, 20-year loan comes to Rs 79,645.
UCO Bank
UCO Bank's loans start at 7.35 percent, after the lender cut rates by 95-bps for all their home loan clients. The EMI on a Rs 1-crore, 20-year loan works out to Rs 79,645.
Indian Bank
This bank's cut interest rates by 100 bps, which now start from 7.4 percent for all home loan customers. The EMI on a Rs 1-crore loan with a tenure of 20-years works out to Rs 79,949.
Bank of Baroda
Following a 95-bps cut, BoB's rates start from 7.45 percent for all their home loan clients. The EMI on a Rs 1-crore loan with a 20-year tenure works out to Rs 80,254.
State Bank of India and Punjab National Bank
The interest rates of these two banks now start at 7.5 percent, after they cut the same by 90-100 bps for all their home loan customers. The EMI on a Rs 1 crore, 20-year loan comes to Rs 80,559.
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What borrowers should do
Existing borrowers should check if their bank has fully passed on the repo rate cut. If not, Anuj Kesarwani, Founder of Zenith Finserve, advises contacting the bank to clarify the effective rate. If the issue persists, borrowers may consider switching to a bank with lower rates, taking into account the associated switching costs.
“If the difference is sizeable – say, 50 bps or more – and if half their loan tenor and balance remains, they should strongly consider refinancing,” said Shetty.
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