The central bank last week reduced the key interest rate to 5.75 per cent, a level last seen in September 2010.

A repo rate-linked home loan would mean that any changes in the key interest rate by the central bank would be passed on directly to the customers. Currently, the interest rates applicable to regular home loans are decided by the commercial banks from time to time.

The Reserve Bank of India has on several occasions in the past few months urged the commercial banks to transmit the rate cuts to the public.

State Bank of India also said the benefit of the latest reduction in the repo rate has been passed fully to cash credit account and overdraft customers with limits of over Rs 1 lakh.

After the move, the effective repo-linked lending rate (RLLR) for cash credit and overdraft customers will be 8 per cent. These changes will also take effect on July 1.

The Reserve Bank of India's Monetary Policy Committee (MPC) on Thursday unanimously lowered the repo rate by 25 basis points and switched to an "accommodative" stance from "neutral".

The decision by the RBI to ease the monetary policy follows official data last month showing India lost its status as the fastest growing major economy to China.

RBI Governor Shaktikanta Das said, after the release of the policy statement, the central bank would ensure a "faster and higher" transmission by commercial banks to pass on the benefit of lower interest rates to their customers.

Thursday's reduction in rate cut marked the third straight reduction of 25 basis points in the central bank's bi-monthly policy review. The RBI has reduced the repo rate each in its policy reviews in February and April this year.