What is the Current Commercial Loan Interest Rate in India?
The current commercial loan interest rate in India for 2026 generally starts from 8.00% to 11.00% per annum. Rates vary based on the lender, your credit score, and the specific type of commercial property or business asset you intend to finance with the loan
Which bank offers the lowest commercial loan interest rate?
The State Bank of India (SBI) and Punjab National Bank (PNB) currently offer the lowest commercial property loan interest rate, starting at approximately 8.00% to 9.25%. Rates are often linked to the External Benchmark Lending Rate (EBLR) or the Marginal Cost of Funds-Based Lending Rate (MCLR).
Finding which bank offers the lowest commercial loan interest rate requires looking at Public Sector Banks (PSBs). Banks like SBI are often the most competitive for MSME borrowers. Private lenders like HDFC Bank and ICICI Bank offer rates starting from 9.50%, but they provide faster processing. Commercial loan interest rate eligibility criteria often favor borrowers with a CIBIL score above 750.
State Bank of India (SBI) | 8.00% – 10.75% |
Punjab National Bank (PNB) | 8.75% – 11.20% |
Union Bank of India | 8.60% – 10.95% |
HDFC Bank | 9.50% – 15.25% |
Axis Bank | 9.15% – 11.90% |
As per current guidelines, you should check the official bank portals. Rates can change based on RBI repo rate updates. Always verify the latest “spread” or “markup” added to the benchmark rate by your chosen bank.
What is the interest rate for commercial property loans?
The commercial property loan interest rate in India typically ranges between 8.75% and 12.00% for most borrowers in 2026. This rate applies to loans used for buying shops, office spaces, or warehouses, and is slightly higher than residential housing loan rates.
When you buy a shop or office, banks see more risk. This is why the current commercial loan interest rate is higher than a home loan. For example, PNB Housing Finance starts its rates at 8.75% for high-credit borrowers. However, if your business is new, the rate could go up to 13%.
Lenders also look at the property type. An office in a prime city area might get a better rate. A warehouse in a remote spot might face higher costs. Most banks offer a “Floating Rate”, which means your EMI can change. You must read the fine print about “reset periods” to understand when your rate might move.
How is commercial loan interest calculated?
Most banks use the Reducing Balance Method to determine how commercial loan interest is calculated. In this method, the interest is only charged on the outstanding principal amount each month, rather than the original total loan amount you borrowed.
The formula for the monthly interest is simple:
Interest = Principal × Rate × Time (I=PRT)
Every time you pay an EMI, a part goes to the principal. The rest goes to the interest. As the principal drops, the interest amount also drops. This is better for you than a “Flat Rate” system. In a flat rate system, you pay interest on the full amount for the whole time. Always ask your bank for an “Amortization Schedule.” This chart shows exactly how much you pay each month. It helps you see how much of your money is actually reducing your debt.
What factors affect commercial loan interest rates?
Key factors include your credit score, the Loan-to-Value (LTV) ratio, and your business’s financial stability. Lenders also consider the location of the commercial property and the prevailing RBI repo rate, which currently influences the commercial loan interest rate.
- Credit Score: A CIBIL score of 750 or more helps you get the best deals.
- LTV Ratio: If you pay a larger down payment, the bank takes less risk. This leads to a lower rate.
- Business Vintage: Older, profitable businesses get better rates than brand-new startups.
- Property Type: Ready-to-move offices are safer for banks than under-construction projects.
- Internal Benchmarks: Banks add a “spread” to the RBI repo rate based on your risk profile.
If your business has a high “Debt-to-Income” ratio, you might pay more. Banks want to see that your business earns enough to pay back the loan. They will check your Income Tax Returns (ITR) for the last three years. Providing audited balance sheets can act as a trust signal for the lender.
How can I get a lower interest rate on a commercial loan?
To learn how to get a lower interest rate on a commercial loan, focus on improving your credit score and offering additional collateral. Negotiating with multiple lenders and choosing a shorter tenure can also help you secure a more competitive and affordable rate.
You can follow these simple steps:
- Improve your CIBIL: Clear all small debts before you apply.
- Compare Lenders: Don’t just stick to your current bank. Check others.
- Opt for a Shorter Tenure: Banks sometimes give lower rates for shorter terms.
- Use MSME Schemes: If you are a small business, check for government subsidies.
- Stable Cash Flow: Show the bank a steady stream of business income.
Another smart move is to check for “Balance Transfer” options later. If another bank offers a lower rate after two years, you can move your loan. But be careful of the “Processing Fees” and “Legal Charges” when you switch. These extra costs can sometimes be higher than the interest you save.
How do commercial loan interest rates compare with home loan rates?
In 2026, commercial property loan interest rates are usually 1% to 3% higher than home loan rates. While home loans start around 7.35%, commercial loans rarely go below 8.50% due to the higher risk associated with business properties.
Starting Rate | ~7.35% p.a. | ~8.75% p.a. |
Max Tenure | Up to 30 Years | Up to 15 Years |
Tax Benefit | Under Section 24 & 80C | Interest is a Business Expense |
LTV Ratio | Up to 90% | Usually 60% – 75% |
Home loans are for living, which banks see as a basic need. People rarely default on the house they live in. Commercial properties are for business. If the business fails, the loan might not be paid. That is why the current commercial loan interest rate is always a bit higher. Also, the documentation for commercial loans is much more complex. You need to show business plans and GST records, which are not needed for a home loan.
What are the commercial loan interest rate eligibility criteria?
The commercial loan interest rate eligibility criteria require the borrower to be between 21 and 65 years of age with a stable income source. Businesses should generally have a minimum turnover and at least three years of operational history to qualify for the best rates.
Most banks in India look for these basic things:
- Type of Entity: You can be a solo owner, a partner, or a private company.
- Work Experience: You should have been in the same business for at least 3 years.
- Income Proof: You need to show ITR and bank statements for 6 to 12 months.
- Property Documents: The property must have a clear title and “No Objection Certificate“ (NOC).
- Resident Status: You must be an Indian resident, though some banks have NRI schemes.
If you meet all these, you can get a loan of up to Rs. 50 Crores or more. For small shops, the limit is usually lower. Always remember that the final rate is decided only after the bank checks your files. No rate is “fixed” until you get the sanction letter. Users should verify these details via official sources before signing any documents.
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