Why some of the IITs such as IIT-M IIT-B are still called as IIT Madras & Bombay even though the cities have been changed to Chennai and Mumbai?

IITs have built a reputation among top universities and companies both within and outside India. The reputation is linked with the name of the Institute and hence a change of name will affect the reputation of the Institute. 

To make it simpler, IITB is famous even outside India but if its name is changed to IITM (Mumbai) then people who are unaware of the new name will not be convinced of the institute's credibility. Similarly, the admission application of an IIT Madras student will lose its credibility if instead of Madras the institute's name is written as IIT Chennai. This is because the latter is not known to many.

To maintain the credibility of the Institute, and stop any kind of misunderstandings the name has not been changed.