Bank of Baroda, HDFC Bank Cut Lending Rates After RBI Repo Slash

Lower EMIs likely for millions as leading Indian banks respond swiftly to RBI’s monetary easing with lending rate cuts.

Arpit Thakur 2 weeks agoLast Updated: June 9, 2025

69,167 3 minutes read

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Reviewed & Published by HH Business Desk

Mumbai, June 8: In a week that’s reshaping lending costs across the board, two of India’s biggest banks—Bank of Baroda and HDFC Bank—have lowered their key interest rates, opening the door to cheaper loans for millions. The move, which comes just a day after the Reserve Bank of India pulled an unexpected lever by cutting the repo rate, signals a clear shift in the credit environment.

Bank of Baroda Slashes RLLR by 50 Basis Points

Of the two, Bank of Baroda has made the more aggressive move. It announced a 50 basis point cut in its Repo-Linked Lending Rate (RLLR), taking it down to 8.15%. The change took effect on June 7, just 24 hours after the RBI trimmed the benchmark repo rate to 5.50%.

For borrowers, especially those tied to RLLR-based home loans, the impact is immediate. Monthly EMIs are expected to ease. For a ₹40 lakh loan over 20 years, the cut could bring down the monthly outgo by close to ₹1,200. That’s not insignificant—particularly at a time when household budgets are already feeling the pinch.

Bank officials were tight-lipped in public statements, but a senior source confirmed the move was “a direct result of the RBI’s repo cut”—a pass-through, in banking parlance.

HDFC Bank Opts for a More Cautious Approach

HDFC Bank took a more measured path. It reduced its Marginal Cost of Funds-based Lending Rate (MCLR) by 10 basis points across all loan tenures. This too took effect from June 7.

According to the revised structure, the overnight and one-month MCLR now stands at 8.90%, while the six-month and one-year tenures are at 9.05%. For two- and three-year periods, the MCLR is now 9.10%.

The MCLR system isn’t as reactive as RLLR—borrowers typically see the benefit only at their next reset date, which might be six or twelve months away. But for customers with loans nearing review, the change will bring relief.

Bank insiders said the cut reflects “easing funding costs and broader alignment with policy rates.” It’s a nod to competitiveness as much as compliance.

The Trigger: RBI’s Unexpected Easing

The chain reaction was sparked by the RBI’s surprise move on June 6, when it cut the repo rate by 50 basis points, citing cooling inflation and sluggish credit growth. It also lowered the Cash Reserve Ratio (CRR) by 100 basis points, freeing up capital for banks to lend.

That double-barrelled move caught markets and analysts off guard. But the central bank defended it, saying that while inflation had moderated, signs of economic fatigue were becoming hard to ignore.

“The timing was unexpected, but the direction isn’t,” said an economist with a leading private bank. “We’re now seeing a central bank willing to nudge growth again.”

Borrowers Set to Gain

For retail borrowers, this turn of events is more than just policy. It’s pocketbook relief. With rates coming down, both new and existing loan holders—especially those with floating rates—can expect lower EMIs in the months ahead.

Those holding RLLR-based loans will see the effect almost instantly. For MCLR-linked loans, it’ll show up gradually. But either way, the trend is clear: the cost of borrowing is finally coming down after months of being stuck at higher levels.

Financial advisors recommend reviewing existing loan terms, checking the next reset dates, and keeping an eye on communications from lenders.

More Banks Likely to Follow

So far, only Bank of Baroda and HDFC Bank have made their announcements. But that’s unlikely to remain the case for long. According to sector watchers, other heavyweights like SBI, Axis Bank, and Canara Bank are expected to roll out their own revisions soon.

There’s competitive pressure as well—no bank wants to be left offering more expensive loans in a falling rate cycle.

“There’s a domino effect here,” noted a credit analyst. “Once a few large banks move, the rest usually follow within days.”

Credit Uptick on the Horizon?

While rate cuts always grab headlines, the real question is whether they’ll spur lending. The RBI is clearly hoping so. Recent data showed credit growth softening, particularly in the MSME and housing segments.

If these rate adjustments translate into increased loan uptake, the central bank’s gamble might pay off. Otherwise, we could be looking at further policy tweaks later this year.

Either way, the message to the market is unambiguous: credit is being made cheaper, and banks are being nudged to lend more freely.

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Author Profile

Arpit Thakur

Reporting Fellow at Hindustan Herald

Arpit Thakur is a Reporting Fellow at Hindustan Herald, dedicated to covering the dynamic world of business and finance. A student at Amity University, Noida, Arpit leverages his academic insights to provide daily, well-researched analyses of market trends, corporate developments, and economic policies. He is committed to delivering clear and impactful financial news to our readers.