By buld_online 
Canara Bank and Union Bank reduce lending rates following RBI’s 50 basis point repo rate cut to 5.5%, effective June 2025.
In response to the Reserve Bank of India’s (RBI) recent monetary policy adjustment, Canara Bank and Union Bank of India have announced cuts in their lending rates. This follows the RBI’s decision on June 6, 2025, to lower the repo rate by 50 basis points, bringing it down from 6% to 5.5%.
Canara Bank stated it would reduce its Marginal Cost of Funds Based Lending Rate (MCLR) by 20 basis points across all loan tenures, with the changes taking effect from June 12, 2025. The MCLR serves as a crucial benchmark for most floating-rate loans, particularly older home and business loans. This reduction is expected to make loans more affordable for borrowers, easing their financial burden and potentially increasing the demand for credit.
Union Bank of India has also revised its lending rates. The bank adjusted its External Benchmark Lending Rate (EBLR) and Repo Linked Lending Rate (RLLR) by 50 basis points, mirroring the RBI’s policy rate revision. These changes took effect on June 11, 2025, making it easier for borrowers to manage their loan repayments. The EBLR and RLLR are directly linked to the RBI’s repo rate, meaning that any changes in the repo rate are quickly reflected in these lending rates, thus providing immediate relief to borrowers.
On June 6, 2025, the Reserve Bank of India announced a surprise reduction of 50 basis points in the repo rate, lowering it to 5.5% from its previous level of 6%. Additionally, the Cash Reserve Ratio (CRR) was reduced by 100 basis points.
This latest rate cut marks a total decrease of 100 basis points since February this year. Governor Sanjay Malhotra stated that with the rapid reduction in repo rates, the Monetary Policy Committee (MPC) believes there is limited scope for further policy adjustments to stimulate economic growth.
The RBI’s rate cut is part of a broader monetary policy strategy, with the Monetary Policy Committee having reduced interest rates by 100 basis points since February 2025. The recent adjustments in lending rates by Canara Bank and Union Bank are anticipated to lower the burden of Equated Monthly Instalments (EMIs) for both new and existing borrowers across various loan segments, including retail, home, auto, and personal loans. The reduction in interest rates is also expected to positively impact the Micro, Small and Medium Enterprises (MSMEs), which often rely heavily on bank loans for their operations.
This move by the banks is expected to stimulate credit demand, providing a much-needed boost to the economy. As borrowers benefit from reduced interest rates, the market could see increased activity in the retail and MSME loan sectors. The adjustments align with the RBI’s efforts to enhance economic growth by making loans more affordable for consumers. With the cost of borrowing decreasing, businesses may find it easier to invest in expansion and development, potentially leading to job creation and further economic benefits.
Overall, the coordinated efforts of the RBI and these major banks aim to create a more conducive environment for economic growth. By lowering lending rates, they are not only supporting existing borrowers but also encouraging new borrowers to enter the market, thereby fostering a cycle of growth and stability.