- The bank said it is catching on the 40-bps repo rate cut announced by RBI on 22 May to its borrowers availing loans connected to the EBR as well as RLLR
- Following the cut, active from 10 June, the one-year rate comes down to 7% and is the bank’s thirteenth continuous MCLR reduction
MUMBAI: India’s largest lender State Bank of India (SBI) on Monday lowered its minimal cost of funds-based lending rate (MCLR) by 25 basis points (bps) across all courses.
Following the cut, effective 10 June, the one-year rate comes down to 7% and is the bank’s thirteenth consecutive MCLR reduction. 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.
However, the bank also said it is passing on the 40-bps repo rate cut announced by RBI on 22 May to its borrowers availing loans linked to the external benchmark related lending rate (EBR) as well as repo similar lending rate (RLLR). From 1 July, the EBR will be reduced to 6.65%, and the RLLR will be reduced to 6.25%. This reduction will benefit retail and small business borrowers.
Consequently, equated monthly instalments (EMIs) on eligible home loan accounts linked to MCLR will get cheaper by approximately ₹421 and those linked to EBR/RLLR will get cheaper by around ₹660, for a 30 years loan of ₹25 lakh.
On 27 May, SBI had lowered its fixed deposits rates by up to 40 bps. It was the bank’s second deposit rate cut in May, with the last one on 12 May. Retail depositors now earn an interest of 5.1% on their 1-2-year term deposits of below ₹2 crore, down from 5.5% earlier. After RBI lowered its repo rate by 40 basis points (bps) on 22 May, SBI chairman Rajnish Kumar said the bank will convene a meeting of its asset liability committee (ALCO), the panel that deliberates on interest rate changes.