Low Interest Rate Loans

Borrowing has become cheaper now, find out which bank has reduced interest rates the most.In August 2025, the average interest rate on new rupee loans offered by banks fell to 8.75%, a 6 basis point decrease compared to July.  Private sector banks saw the biggest reduction, reducing their loan rates to 9.44%. The average interest rate on previously issued loans also declined. However, deposit rates were also reduced during this period.

Low Interest Rate Loans
In August 2025, the average interest rate on new rupee loans offered by banks fell by 6 basis points (bps) compared to July, to 8.75%. One basis point equals 0.01%. Consequently, borrowing will now become cheaper.

Let's find out which banks have reduced their interest rates the most.

Private banks reduced their loan rates by the largest margin, 15 bps, bringing the average rate to 9.44%. Public sector banks reduced their average rate by 7 bps, bringing their average rate to 8.06%, while foreign banks made a modest reduction of only 3 bps, bringing their average interest rate to 8.22%.Relief on previously issued loans also
Interest rates on previously issued loans also saw a reduction at the end of August. The system-wide average interest rate fell by 6 bps to 9.32%. Private banks reduced their interest rates the most, by 10 basis points, reaching 10.22%. Public sector banks, on the other hand, reduced their rates by 3 bps, bringing their average rate to 8.70%. However, foreign banks have not made any changes to their interest rates.

RBI Policy Rate and MCLR
The Reserve Bank of India (RBI) has cut the repo rate by a total of 100 bps so far this year. However, the one-year median marginal cost of funds-based lending rate (MCLR) for scheduled commercial banks (SCBs) remained unchanged at 8.60% in September 2025. MCLR refers to the interest rate below which banks cannot lend.

Which benchmark are the loans linked to?
Looking at the loan structure, loans linked to external benchmark (EBLR) increased to 62.9% by the end of June 2025, compared to 61.6% in March. Meanwhile, loans linked to MCLR declined to 33.8% from 34.9% in March 2025. External Benchmark (EBLR) means that banks cannot set interest rates at will, but must be linked to the benchmark set by the RBI.Stories of your choice'One stock can change your life,'

Deposit rates also declined. Interest rates on deposits also declined in August. The average interest rate on new term deposits fell to 5.56%, compared to 5.61% in July. The average interest rate on existing term deposits declined to 6.87% from 6.92%. Private banks cut deposit rates by 5 bps in August, while PSU banks reduced them by 4 bps during the same period.