Despite RBI’s repo rate cut to 5.5%, State Bank of India has increased home loan rates by 25 basis points, impacting new borrowers.
New Delhi
India’s largest mortgage lender, State Bank of India (SBI), has raised its home loan rates by 25 basis points for new borrowers, even as the Reserve Bank of India (RBI) cut the repo rate to 5.5% in an effort to ease borrowing costs. The bank revised its interest band from 7.50%–8.45% to 7.50%–8.70%, with the hike affecting borrowers with lower credit scores the most.
Other public sector banks, including Union Bank of India, Bank of India, Bank of Maharashtra, and Central Bank of India, continue to offer loans starting from 7.35%, with rates varying based on borrower credit profiles. Analysts suggest these banks may follow SBI’s lead in the coming weeks.
The RBI has reduced the repo rate three times consecutively this year, aiming to lower lending costs and stimulate economic activity. Typically, such cuts make loans cheaper, especially those tied to the External Benchmark Lending Rate (EBLR). According to SBI Research, nearly 60% of loans by Scheduled Commercial Banks are linked to EBLR, meaning changes in the repo rate should be felt quickly by consumers.
As of August 2025, SBI’s new home loans remain primarily pegged to the repo rate plus a spread under the EBLR framework. However, by raising the upper cap of its lending band, the bank has signaled caution. In a statement, SBI noted that while lower rates benefit borrowers, lenders could continue to face margin pressures in the near term.
