SBI cuts lending rates by 10 bps, retail loans to get cheaper

This is the sixth cut in lending rate in FY 2019-20 and it comes days after the Reserve Bank of India (RBI) lowered the repo rate by 25 basis points.

New Delhi:The State Bank of India (SBI) on Wednesday announced lowering its marginal cost of funds based lending rate (MCLR) by 10 basis points across all tenors to 8.05 per cent from October 10. The MCLR cut will make home and other retail loans cheaper for the existing borrowers.

The bank's one-year MCLR has been brought down from 8.15 per cent per annum to 8.05 per cent per annum. This is the sixth cut in MCLR in FY 2019-20 and it comes days after the Reserve Bank of India (RBI) lowered the repo rate by 25 basis points.

"In view of the festival season and to extend the benefit to customers across all segments, the SBI has reduced its MCLR by 10 bps across all tenors," the country's largest state lender said in a statement.

The State Bank of India (SBI) on Wednesday cut interest rate on savings deposits, with a balance of upto Rs 1 lakh, by 25 bps to 3.25 per cent from November 1, and slashed retail & bulk term deposit interest rates by 10 and 30 bps respectively for 1 year to less than 2-year tenor from October 10.

"In view of the adequate liquidity in the system, the State Bank of India announces revision in interest rate on Savings Bank Deposits (with a balance upto Rs 1 lakh) from 3.50 per cent to 3.25 per cent w.e.f. 1st November 2019. Bank also slashes its Retail TD and Bulk TD interest rates by 10 bps and 30 bps respectively for 1 year to less than 2 years' tenor w.e.f. 10th October, 2019," the SBI said in a statement.

SBI shares were trading at Rs 254.95, up Rs 5.85 (2.35%) recovering more than 4 per cent from lows.

Earlier, the bank lowered its Marginal Cost of Funds based Lending Rate or MCLR by 10 basis points across all tenors to 8.05 per cent from October 10, a move that is likely to make home and other retail loans cheaper for the existing borrowers.

This is the sixth cut in MCLR in FY 2019-20 and it comes days after the Reserve Bank of India (RBI) lowered the repo rate by 25 basis points.

MCLR refers to the minimum interest rate of a bank below which it cannot lend, except in some cases allowed by the RBI. MCLR rates are based on a bank's own cost of funds. So if an existing home loan is linked to the SBI's MCLR rate, the latest cut may not bring down its EMIs immediately. MCLR-based loans generally have a one-year reset clause.

To new borrowers, the SBI now also offers a repo-rate linked home loan scheme. Under this scheme, the loan rate gets adjusted as and when the RBI revises its benchmark rate.

The SBI charges a spread of 265 basis points over the RBI's repo rate (currently at 5.15 per cent) to calculate its external benchmark-based lending rate. The bank also charges a premium for effective home loan rate to keep its margins intact.