Loan EMIs to Drop! Indian Overseas Bank Cuts MCLR by 10 bps: Check Revised Rates & Impact on IOB Customers

Indian Overseas Bank (IOB) has announced a 10 basis points (bps) reduction in its Marginal Cost of Funds-Based Lending Rate (MCLR) across all loan tenures, effective from August 15, 2025. The move is aimed at making borrowing more affordable and comes as part of the bank's ongoing review of lending rates in light of current market conditions.

Indian Overseas Banks Cuts Lending Rate

The rate cut was decided during a meeting of the bank's Asset Liability Management Committee (ALCO) held on August 11, 2025, following its evaluation of MCLR data as of August 8, 2025. This is IOB's second consecutive MCLR cut, coming just weeks after a similar reduction in July. The decision is expected to bring relief to borrowers of home loans, personal loans, and other floating-rate credit products.

Revised IOB MCLR Rates from August 15, 2025

• The overnight MCLR has been reduced to 8.05% from the earlier 8.15%.
• The one-month MCLR now stands at 8.30%, down from 8.40%.
• The three-month MCLR has been brought down to 8.45%, compared to the previous 8.55%.
• The six-month MCLR has been revised to 8.70%, a reduction from 8.80%.
• Lastly, the one-year MCLR-a key benchmark for most retail loans-has been lowered to 8.90%, from 9.00% earlier.

What Do MCLR Rate Cuts Mean for Indian Bank Customers?

When banks reduce MCLR, it directly affects floating interest rate loans like home loans, personal loans, car loans, and corporate borrowings. Customers who have loans linked to the MCLR will likely see a decrease in their EMIs (Equated Monthly Installments) over time.

For instance, if a customer has a home loan of Rs 40 lakh linked to a 1-year MCLR at the old rate of 9.00% with a 20-year tenure, the EMI would be approximately Rs 35,990. After a 10 basis point (bps) cut in MCLR, reducing it to 8.90%, the EMI would come down to around Rs 35,823. This results in a monthly saving of Rs 167, or about Rs 2,000 annually. New borrowers also benefit immediately, as their loans are sanctioned at the reduced interest rate.

Who Will Get Most Benefits With IOB MCLR Revised Rates?

MCLR rate cuts benefit both existing and new borrowers, especially those with floating-rate loans. People with home or car loans see the most impact, as these loans are usually for large amounts and longer durations. It also extends to personal loans and corporate borrowings, where EMIs and overall interest outgo could marginally reduce, offering borrowers some financial relief in a high-interest environment.

However, the benefits are not immediate for everyone. Most banks reset MCLR-linked loan rates at fixed intervals like every six or twelve months, so existing borrowers may have to wait a bit before they see a reduction in their EMIs.

SBI Also Cuts MCLR by 5 bps Across All Tenors

Joining the trend, the State Bank of India (SBI)-the country's largest lender-has also announced a 5 basis points reduction in its MCLR across all loan tenors, effective the same day, August 15, 2025.

While the revised rate structure from SBI is yet to be detailed, the reduction signals a broader shift in banking strategy aimed at improving credit uptake amid a slowing economy and stiff competition in the lending market.