The Reserve Bank of India (RBI) adopted an accommodative monetary policy stance during late FY25 and FY26, along with multiple rate cuts. This resulted in a broad-based reduction in lending rates across various sectors, according to a report by CareEdge Ratings.
The report highlights that the impact of these rate cuts was more noticeable in new (fresh) loans, mainly due to the increasing adoption of the External Benchmark Lending Rate (EBLR) system. Under EBLR, loan interest rates are directly linked to an external benchmark like the RBI’s repo rate, making changes in interest rates more transparent and faster to pass on to borrowers.
Among different loan categories, education loans saw the biggest drop in interest rates, declining by 127 basis points (bps). This was followed by:
- MSME loans: down by 97 bps
- Trade loans: down by 94 bps
- Large industry loans: down by 92 bps
- Housing loans: down by 92 bps
Overall, the faster transmission of rate cuts—especially in EBLR-linked loans—has made borrowing cheaper, particularly for new borrowers.
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