Punjab National Bank slashes MCLR by 5 bps to ease borrowing costs

Punjab National Bank (PNB) has stated that it is reducing its Marginal Cost of Funds Based Lending Rate (MCLR) by 5 basis points (bps) on several loan tenors that should help ease the burden on existing and prospective borrowers. This change came into effect on July 1, 2025 and has provided borrowers with some respite in a time of rising interest rates.

Understanding MCLR and why does it matter?

With a few exceptions, the MCLR is the minimum interest rate a bank is allowed by law to lend, and the MCLR is important to compute loan interest rates, especially for products like home loans, personal loans, auto loans, and student loans.

Since MCLR is generally used to determine the interest rate to be charged on floating-rate loans, lending rates go down when MCLR declines which in turn provides relief on EMIs for borrowers.

New MCLR rates announced by PNB

Here are PNB's updated MCLR rates for different tenures following the latest revision:

(Bank’s website)

The one-year tenure of MCLR is very important as it is the benchmark for most retail loans (including personal loans and home loans).

Impact on existing & new borrowers

• Home loans: Borrowers with floating rates home loans linked to MCLR are likely to benefit as their interest costs and monthly EMIs may gradually fall over the duration of their reset cycle.
• Personal & business loans: For customers who plan on using PNB for personal finance, personal loans, or business loans - the reduction in lending rates is beneficial because it makes personal financing more accessible.

How will it affect fixed vs floating interest rates?

The lowering of MCLR won’t be a direct benefit to borrowers with fixed-rate loans. In the coming months, floating-interest rate loan borrowers, particularly those near their reset date, will benefit from lower EMIs.

Should you consider loan repayment or balance transfer?

If the interest rate on your current house loan is substantially more than the new MCLR, consider:

• Transferring to a loan based on MCLR (if it’s not on MCLR already).
• Transferring to PNB or another bank at a lower interest rate.
• Reducing the total interest burden by making prepayments.

In conclusion, a drop of 5 basis points may not sound like much on paper, but over a long period of time it can save borrowers a lot of money. It may also be the ideal time for first time loan applicants to negotiate better conditions.

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