IOB Cuts RLLR by 25 BPS; Loans, EMIs Get Cheaper

Two major state-owned lenders announced rate cuts. And then borrowing became cheaper for millions of customers.

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That’s the financial move happening now. Indian Overseas Bank (IOB) and another state-owned lender have decided to cut their lending rates, mostly effective starting December 15, 2025. This is a huge deal for borrowers.

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IOB’s Aggressive Cut

IOB is the more aggressive one here, fully passing on the recent central bank policy rate cut—let’s be real, that’s what customers want.

• EBLR/RLLR Cut: IOB slashed its Repo Linked Lending Rate (RLLR), which is its External Benchmark Lending Rate (EBLR), by a solid 25 basis points (bps). That’s a drop from 8.35% to 8.10%.

• MCLR Cut: Their Asset Liability Management Committee (ALCO) also approved a 5 bps reduction in the Marginal Cost of Funds-Based Lending Rate (MCLR) across all tenors, from three months right up to three years.

Here’s the kicker: these revisions mean lower Equated Monthly Instalments (EMIs). Retail customers—people with home, vehicle, and personal loans—will see enhanced affordability. Even MSMEs and corporate borrowers get a break, which helps their working capital and business growth.

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The Other Lender’s Mixed Signals

The other state-owned lender also announced rate changes, but it’s a bit more mixed.

• Base Rate/BPLR: They lowered their Base Rate/BPLR from 10% to 9.90%, effective December 15.

• Deposit Rate Cut: They cut the fixed deposit rate by 5 basis points for maturities ranging from two years to less than three years (down to 6.40%). The specific “Amrit Vrishti” scheme for 444 days also saw a cut, moving from 6.60% to 6.45%.

• The Pressure: The thing is, they retained interest rates on other deposit maturity buckets. This small detail signals there might be some pressure on deposit mobilization, meaning they don’t want to cut rates too much for fear of losing customers saving money.

This whole process confirms that the broader interest rate environment is softening, but the banks are balancing the cheaper loans with the need to retain deposits. It’s an ongoing adjustment.

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