SBI Hikes Home Loan Rates Despite RBI Repo Rate Cut 2025
In a surprising move, India’s largest mortgage lender, State Bank of India (SBI), has increased home loan rates for new borrowers by 25 basis points, even as the Reserve Bank of India (RBI) has cut the repo rate to 5.5 per cent to ease borrowing costs.
SBI has revised its interest rate band on home loans from 7.50%–8.45% to 7.50%–8.70%, raising the maximum limit by 25 bps. This revision will particularly impact borrowers with low credit scores, who are likely to face higher borrowing costs.
In comparison, other public sector banks (PSBs) such as Union Bank of India, Bank of India, Bank of Maharashtra, and Central Bank of India currently offer home loans starting from 7.35% and extending up to 10.10% or more, depending on the customer’s credit profile. Analysts suggest that other PSBs may follow SBI’s lead in the coming weeks.
The RBI has cut the repo rate three times in a row to provide relief to the public, expecting banks to pass on the benefits to borrowers through lower loan rates. In fact, SBI itself had earlier noted in a report that repo rate reductions would make loans cheaper—especially those linked to the External Benchmark Lending Rate (EBLR), which accounts for nearly 60% of all loans disbursed by Scheduled Commercial Banks (SCBs).
As of August 2025, most of SBI’s new home loans are linked to the EBLR, which directly moves with the RBI’s repo rate plus a spread. However, despite the easing of policy rates, SBI has cautioned that banks may continue to face pressure on profit margins, possibly explaining the hike in its lending rates.
