3 min readMumbaiAug 15, 2025 09:58 PM IST
Public sector lenders, including the State Bank of India (SBI), Bank of Baroda (BoB) and Indian Overseas Bank (IOB) have reduced their marginal cost of funds-based lending rates (MCLR) by up to 35 basis points (bps) across various tenors.
The reduction follows a cumulative reduction of 100 bps in the repo rate to 5.5 per cent by the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) between February and June. In the August monetary policy meeting, the six-member MPC left the repo rate unchanged. One basis point is one hundredth of one percentage point.
The country’s largest lender, SBI has reduced its MCLR by 5 bps across tenors, effective August 15.
SBI has revised its overnight and one-month MCLRs to 7.90 per cent each from 7.95 per cent earlier. The one-year MCLR, to which most of the corporate loans are linked, has been revised to 8.75 per cent from 8.8 per cent. Its new MCLRs on two-year and three-year loans now stand at 8.8 per cent and 8.85 per cent, respectively.
Another state-run lender, the Bank of Baroda has lowered its one-month MCLR by 35 bps to 7.95 per cent from 8.3 per cent, starting August 12. Its six-month MCLR stands revised to 8.65 per cent (from 8.75 per cent), while the one-year MCLR has been lowered to 8.8 per cent compared to 8.9 per cent. BoB has revised its overnight and three-month MCLRs by 15 bps to 7.95 per cent and 8.35 per cent, respectively.
Chennai-headquartered Indian Overseas Bank has reduced its MCLR by 10 bps across all tenors from Friday. IOB’s one-year and six-month MCLR have been revised to 8.9 per cent and 8.70 per cent, respectively. The bank is now offering an interest rate of 8.3 per cent on one-month MCLR, and 8.45 per cent on three-month MCLR.
Bank of India revised its one-year MCLR by 10 bps to 8.9 per cent effective from August 1.
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In response to the 100-bps reduction in the policy repo rate since February, banks have adjusted their repo-linked external benchmark based lending rates downward by a similar margin. The one-year median MCLR of scheduled commercial banks has moderated to 8.75 per cent in July from 9.05 per cent in February.
What is MCLR?
Introduced on April 1, 2016, MCLR is the minimum interest rate below which banks and non-banking finance companies (NBFCs) cannot lend. In order to further strengthen monetary policy transmission, the RBI introduced the external benchmark-based lending rate (EBLR), linked to the repo rate, in October 2019. All retail loans and floating rate loans to MSMEs are now linked to EBLR.
Any hike or cut in the repo rate gets immediately reflected in loans linked to EBLR. However, a review of interest rates under the MCLR regime happens every month at a pre-announced date by all banks.
