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Despite the RBI’s repo rate cut to 5.5 per cent, aimed at easing borrowing costs, India's largest mortgage lender, State Bank of India (SBI), has increased home loan rates by 25 basis points for new borrowers.

The bank raised the upper band of interest rates by 25 basis points. SBI's interest rates for home loans have increased from the earlier band of 7.50 per cent-8.45 per cent to a new band of 7.50 per cent-8.70 per cent. The new rates will particularly impact customers with low credit scores, as the maximum interest rate limit has been raised.

Public sector banks like Union Bank of India, Bank of India, Bank of Maharashtra, and Central Bank of India offer loans starting at 7.35 per cent and going up to 10.10 per cent or more, depending on the borrower’s credit profile.

Other public sector banks may follow SBI's lead. The repo rate was cut three times consecutively to provide relief to the public. The reduction in the repo rate by the RBI leads to lower interest rates on loans, including home loans, benefiting the public indirectly.

The bank had earlier released a report saying that the RBI's cutting the repo rate will make home loans cheaper. The change will be felt most immediately in loans linked to the External Benchmark Lending Rate (EBLR), which account for around 60 per cent of all loans given by Scheduled Commercial Banks (ASCBs), as per the data compiled by State Bank of India (SBI) Research.

As of August 2025, SBI home loans predominantly link to the External Benchmark Lending Rate (EBLR) for new borrowers, aligning with the RBI's repo rate plus a spread.

Looking ahead, SBI warned that although lower rates benefit borrowers, banks might continue to face pressure on their profit margins.