In a move that would reduce borrowing costs, state-owned Canara Bank has decreased its repo-linked lending rate (RLLR) by 50 basis points (bps), from 8.75% to 8.25%, effective 12 June. This follows the Reserve Bank of India’s (RBI) recent 50 basis point cut in the repo rate to 5.50%, the most significant reduction in five years. With this adjustment, Canara Bank has fully transmitted the RBI’s policy rate cut to its customers, making loans across its portfolio considerably more affordable. The interest rate on home loans now starts at 7.40% per annum, reduced from 7.90%, while vehicle loans begin at 7.70%, down from 8.20%. This is anticipated to lower EMIs for both existing borrowers (at the time of reset) and new applicants, enhancing accessibility to home and vehicle ownership. The bank has also reduced its Marginal Cost of Funds Based Lending Rate (MCLR) by up to 20 basis points across tenures, providing relief for customers with older loans still linked to MCLR. Other Banks Also Cut Lending Rates Canara Bank is not alone in reducing rates. Several other banks have already aligned lending rates with the RBI’s policy move. Punjab National Bank (PNB) has reduced its RLLR by 50 basis points to 8.35%, effective 9 June. Bank of Baroda lowered its RLLR to 8.15%, effective 7 June. Indian Bank, Bank of India, UCO Bank, and Indian Overseas Bank (IOB) also announced similar 50 bps reductions to their repo-linked lending rates. Union Bank of India decreased its RLLR to 8.25%, effective 11 June. Among private lenders, HDFC Bank chose to reduce its MCLR by 10 basis points across tenures, benefiting borrowers under the older benchmark regime. Why Are Banks Cutting Rates? The wave of lending rate cuts follows the RBI’s policy easing, which aims to stimulate credit growth, revive consumption, and boost economic activity. By making borrowing more affordable, banks aim to drive demand across sectors such as housing, automobiles, and MSMEs. With banks now reducing their lending rates, the banking sector is clearly passing on the RBI rate cut to borrowers. For consumers, this translates into lower EMIs, increased affordability, and greater flexibility to invest in homes, vehicles, and small businesses. Experts said borrowers should consult their banks regarding reset dates and revised EMI schedules, or to explore new loan options, to capitalise on the current softening interest rate cycle.