Following the recent repo rate cut by the RBI in its June MPC meeting, several banks have reduced interest rates on consumer loans, including home loans. Joining the list, Canara Bank has also slashed rates on home and vehicle loans, making EMIs more affordable and loans easier to avail.
Canara Bank, one of the leading public sector banks in the country, has cut its Repo Linked Lending Rate (RLLR) from 8.75% to 8.25%. These new rates have come into effect from June 12, 2025. With this cut, home loans and vehicle loans have become cheaper.
Canara Bank new home, car loan rates
The minimum interest rate of housing loan has now come down from 7.90% to 7.40%.
At the same time, vehicle loan will now be available at 7.70% instead of 8.20%.
The Reserve Bank of India (RBI) recently cut the repo rate for the third time – this time by 0.50%. After this, the repo rate has now come down to 5.50%. The reduction in repo rate has a direct impact on the common people as it reduces the interest rates of the loan.
Also read: Canara Bank cuts home, personal loan interest rates — check new lending rates
It is clear from this that those who were earlier hesitant to take a loan due to expensive EMI, will now get relief. This step will prove to be very helpful for middle class families living in small towns and villages.
Other banks are also not behind in rate cut race
Apart from Canara Bank, other government banks are also reducing rates rapidly:
PNB and Bank of India have reduced their RLLR from 8.85% to 8.35%.
Bank of Baroda has reduced its rates from 8.65% to 8.15%.
It is clear from this that now the competition among banks is increasing and the customers will get direct benefit from this.
How are interest rates determined?
When banks offer home loans, there can be three types of interest rates — floating rate, repo-linked rate, and fixed rate. These technical terms can often confuse the common man, but it is important to understand them so that you can choose the best loan option for yourself.
- Floating Rate Loan
This loan is for the customer who can take a little risk. In this, the interest rates keep changing over time — if the bank increases or decreases its internal interest rate (such as MCLR or base rate), then your EMI also changes accordingly. The advantage of this is that when the interest rates decrease, your EMI will also decrease. But if the rates increase, the EMI will also increase.
- Repo-linked Loan
This is the most popular and transparent option in today’s time. It is directly linked to the RBI’s repo rate. This means that whenever RBI reduces the repo rate, your loan interest rate also reduces just as quickly.
RBI has made it mandatory to link all new retail loans (such as home, auto, personal loans) to repo or other external benchmarks from 1 October 2019.
The biggest advantage of this is that the customer gets direct and quick benefit of interest rate changes. Canara Bank’s recent interest cut is also a part of this repo-linked model.
- Fixed Rate Loan
There are some customers who do not want their EMI to change from time to time. For them, there is an option of fixed rate loan, in which the interest rate remains fixed for the entire period. This lets you know from the beginning how much EMI will be every month.
The RBI has made it mandatory for banks to give customers the option of fixed rate as well, and if the customer wants to go from floating to fixed (or vice versa), then it should be allowed – although there may be some charges.