In June 2025, several leading Indian banks have updated their loan interest rates, particularly their Marginal Cost of Funds-based Lending Rates (MCLR), which directly impact how much interest borrowers will pay on home loans, personal loans, and vehicle loans. If you’re planning to take a loan, knowing the banks-offering-lowest-loan-rates can help you make a smart financial decision.
This article covers everything you need to know about MCLR, recent rate changes in major banks, and how to find the most affordable loans.
What is MCLR?
MCLR or Marginal Cost of Funds-based Lending Rate is the minimum interest rate that banks are allowed to lend at. It was introduced by the Reserve Bank of India (RBI) to make lending rates more responsive to policy rate changes.
Each bank sets its own MCLR based on factors like:
- Cost of funds (mainly from RBI repo rate and deposit interest)
- Operating expenses
- Tenure premium (longer the loan term, higher the rate)
Banks usually offer floating interest loans based on their MCLR, so any revision can impact your monthly EMIs.
Banks Offering Lowest Loan Rates – June 2025 MCLR Update
Here is the comparison of MCLR across five major banks in India for June 2025:
| Bank Name | Overnight MCLR | 1-Month | 3-Month | 6-Month | 1-Year | 2-Year | 3-Year |
|---|---|---|---|---|---|---|---|
| SBI | 8.20% | 8.20% | 8.55% | 8.90% | 9.00% | 9.05% | 9.10% |
| PNB | 8.25% | 8.40% | 8.60% | 8.80% | 8.95% | - | 9.25% |
| Canara Bank | 8.00% | 8.05% | 8.25% | 8.60% | 9.00% | 8.95% | 9.00% |
| HDFC Bank | 8.90% | 8.90% | 8.95% | 9.05% | 9.05% | 9.10% | 9.10% |
| Bank of Baroda | 8.15% | 8.30% | 8.50% | 8.75% | 8.90% | - | - |
Lowest 1-Year MCLR: Bank of Baroda (8.90%)
Lowest Short-Term MCLR (Overnight & 1-Month): Canara Bank (8.00% & 8.05%)
Detailed Bank-wise Loan Rate Overview
State Bank of India (SBI)
- No change in MCLR across tenures in June 2025.
- Reliable and consistent rate offering.
- Popular for home loans and government employee loans.
Punjab National Bank (PNB)
- Also kept its rates unchanged.
- Offers slightly higher rates compared to Canara or BoB.
- Three-year MCLR is one of the highest (9.25%), so longer-term loans may be costlier.
Canara Bank
- Biggest rate cut among all major banks this month.
- Reduced overnight and 1-month MCLR by 20 basis points.
- Now offers lowest short-term rates among all top banks.
- A good option for short to medium-term personal or business loans.
HDFC Bank
- Made a 10 bps reduction across most loan tenures.
- Despite cuts, still on the higher side for short-term loans.
- Often preferred for home loans due to their faster approval and digital process.
Bank of Baroda (BoB)
- Slight rate reduction across the board.
- Offers the lowest 1-year MCLR in June 2025, which is crucial since most floating loans are linked to 1-year MCLR.
- Recommended for borrowers looking for competitive long-term loan rates.
Why MCLR Rates Matter for You
If you already have a floating rate loan, your EMI may go down (or remain unchanged) if your bank reduces the MCLR.
For new borrowers, comparing MCLR rates before taking a loan helps:
- Lower interest outgo
- Better EMI planning
- Saving thousands over the loan tenure
Tips to Choose the Right Bank for a Loan
- Compare MCLR, not just advertised loan rates.
- Ask your bank if the loan is linked to 1-year MCLR, which is most common.
- Factor in processing fees, prepayment charges, and hidden costs.
- Choose a bank with a good track record of passing on rate cuts.
- Consider customer service quality and digital banking ease.
Frequently Asked Questions (FAQs)
Q1. What is MCLR in banking?
Answer: MCLR or Marginal Cost of Funds-based Lending Rate is the minimum interest rate at which a bank can lend. It is influenced by RBI’s repo rate and internal cost of funds.
Q2. Which bank offers the lowest home loan interest rate in June 2025?
Answer: Based on the updated MCLR, Bank of Baroda and Canara Bank offer the lowest rates in different tenures.
Q3. Does lower MCLR guarantee lower EMI?
Answer: Yes, if your loan is linked to MCLR and it gets revised downward, your EMI can reduce.
Q4. Is MCLR better than repo-linked rates?
Answer: Repo-linked loans adjust faster with RBI’s rate changes, but MCLR-linked loans offer more stability. Choose based on your preference for flexibility or predictability.
Q5. How often do banks update MCLR?
Answer: Banks are required to revise MCLR monthly, usually at the beginning or mid of each month.
Conclusion
Choosing the right lender is critical to your financial health, especially when loans are involved. With MCLR revisions happening every month, keeping an eye on banks-offering-lowest-loan-rates like Canara Bank and Bank of Baroda in June 2025 can help you save significantly.