SBI home loan rates increase: What it means for new borrowers, EMIs

New Delhi: In a move that contrasts with the Reserve Bank of India’s (RBI) recent cut in the repo rate to 5.5 per cent aimed at lowering borrowing costs, State Bank of India (SBI), the country’s largest lender, has raised home loan interest rates by 25 basis points for new customers.

The latest revision increases the upper range of SBI’s home loan rates from 8.45 per cent to 8.70 per cent, while the lower limit remains unchanged at 7.50 per cent. This adjustment will notably affect borrowers with lower credit scores, as the maximum interest rate ceiling has now risen.

Several other Public Sector Undertaking (PSU) banks like Union Bank of India, Bank of India, Bank of Maharashtra, and Central Bank of India provide home loans starting at 7.35 per cent and go as high as 10.10 per cent or more, based on borrowers' credit profiles.

There is a possibility that more PSU banks may follow SBI’s decision soon. The RBI has cut the repo rate three times consecutively to ease the financial burden on borrowers. Typically, repo rate reductions lead to lower lending rates on products like home loans, passing benefits to consumers.

Earlier, SBI had projected that cuts in the repo rate would translate into cheaper home loan rates. Currently, a majority, around 60 per cent, of loans disbursed by Scheduled Commercial Banks (ASCBs) are linked to the External Benchmark Lending Rate (EBLR), which is influenced by the RBI’s repo rate plus an additional spread, as per SBI Research.

As of August 2025, SBI home loans for new borrowers are predominantly linked to the EBLR, aligning their rates to the prevailing repo rate.

SBI also highlighted that despite the advantage of lower rates for customers, banks might continue confronting margin pressures amid such rate adjustments.

With inputs from IANS