Indian Bank Changes Its Lending Rates

In response to the RBI's repo rate reduction to 5.25 percent, Indian Bank has revised its lending rates. Read on to understand the changes made to the Repo Linked Benchmark Lending Rate and the one-year MCLR, and what they signify for customers.

Repo Rate's Influence

The Reserve Bank of India (RBI) decided to lower the repo rate to 5.25 percent, a move that prompted a financial response from Indian Bank. The repo rate acts as the benchmark interest rate at which the RBI lends money to commercial banks. When this rate is reduced, it typically becomes cheaper for banks to borrow funds. Subsequently, this cost saving is often passed on to consumers in the form of lower lending rates. This process can stimulate economic activity by making borrowing more affordable for individuals and businesses. The decision of the RBI thus has a broad impact on the banking sector and the borrowing public.

Repo Rate Lending Rate

Following the RBI's rate cut, Indian Bank adjusted its Repo Linked Benchmark Lending Rate to 7.95 percent. This adjustment is directly linked to the prevailing repo rate set by the central bank. The Repo Linked Benchmark Lending Rate, as the name indicates, mirrors the fluctuations in the repo rate. This means that if the RBI makes further adjustments, the bank's lending rate will likely change accordingly. This mechanism ensures that the bank's lending rates remain competitive and responsive to the broader monetary policy environment. The new rate of 7.95 percent offers borrowers a potential cost-saving opportunity, especially those with loans tied to this benchmark.

MCLR Rate Reduction

Besides the Repo Linked Benchmark Lending Rate, Indian Bank also announced a decrease of 5 basis points in its one-year Marginal Cost of Funds Based Lending Rate (MCLR). This reduction brought the MCLR down to 8.80 percent, effective December 3, 2025. MCLR is an internal benchmark rate that banks use to determine the interest rates on various loans. The decrease in MCLR indicates that the bank's cost of funds has decreased, allowing it to offer more competitive rates. The changes in MCLR reflect the bank's efforts to align its lending rates with the overall interest rate environment and market dynamics. This helps in attracting and retaining customers, and also stimulates demand for loans.