India's largest commercial lender State Bank of India announced yet another reduction in lending rates on Wednesday. The State Bank of India (SBI) cut its marginal cost of funds-based lending (MCLR) rate by 10 basis points (bps), effective October 10.
This is the bank's sixth consecutive cut in MCLR in the current fiscal, and it comes on the heels of the 25 bps reduction in repo rate by the RBI last week. The Monetary Policy Committee slashed the short-term lending rate for the fifth time in a row bringing it down to 5.15 per cent.
"In view of the festival season and extending the benefits to customers across all segments, we have reduced our MCLR by 10 bps across all tenors," the bank said in a statement. The tenors range from overnight to three years. For instance, one-year MCLR - to which all retail lending rates are pegged - will come down to 8.05 per cent from Thursday, compared to 8.15 per cent currently.
This means that those shopping around for retail loans, including home loans, are in for a cheaper deal. However, existing SBI home loan customers may have to wait awhile to see an impact on their EMIs because of the reset clause. The interest rate of the loan for the borrower is changed only on the reset period, which is typically one year. So your loan rate will go down only after 12 months from the reset date.
It is important to note that the latest SBI rate reduction is not applicable to the repo-linked loans. The bank was the first in the country to link its short-term loans and large savings deposits rates to the RBI repo rate earlier this year, and had followed it up with repo-linked home loans. Last month, the banking regulator made it mandatory for banks to link all new floating rate personal or retail loans to key repo rates or external benchmarks with effect from October 1.
With PTI inputs