Home loan to get cheaper as SBI to cut MCLR by 25 bps from June 10

The country’s largest lender State Bank of India (SBI) on Monday announced it will reduce the marginal cost of fund-based lending rate (MCLR) by 25 basis points (bps) across all tenors from June 10 (Wednesday).

SBI has also reduced its base rate by 75 basis points, from 8.15 percent to 7.40 percent, effective June 10.

The one-year MCLR has been revised to 7 percent from 7.25 percent, the bank said in a release. This is the thirteenth consecutive reduction in the bank’s MCLR.

Interest rates have been falling for over a year now and the central bank recently reduced its repo rate by 115 bps since the end of March.

However, the reduction in MCLR will not affect retail loans disbursed after 1 October, when banks moved to an external benchmark as directed by the Reserve Bank of India’s (RBI). Banks can now choose between the repo rate, or the yield on three-month or six-month treasury bills, or any other benchmark rate published by the Financial Benchmarks India Pvt. Ltd (FBIL). The move will help existing retail SBI customers who borrowed before October 2019, and corporate loans which are yet to move to an external benchmark.

The bank also announced to reduce its external benchmark linked lending rate (EBR) as well as repo linked lending rate (RLLR) by 40 basis points from July 1.

While EBR has been reduced to 6.65 percent per annum from 7.05 percent per annum, RLLR reduced to 6.25 percent from 6.65 percent, it said.

“Consequently, EMIs on eligible home loan accounts linked to MCLR will get cheaper by nearly Rs 421, and those linked to EBR/RLLR will get cheaper by around Rs 660, for a 30 years loan of Rs 25 lakh,” the bank said in the release.

The cut in EBR and RLLR by the bank comes after the Reserve Bank of India (RBI) on May 22 had cut repo rate by 40 basis points to 4 percent.

Some of the banks like Punjab National Bank (PNB), Bank of India (BOI), and UCO Bank have already slashed their lending rates linked to the repo rate and MCLR rates.

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