State Bank of India has cut its marginal cost of fund-based lending rate (MCLR) by 10 basis points. It will reduce the EMI of millions of home loan customers. The deduction will go into effect from December 10. This will make floating-rate home loans cheaper.
While the benefits of this reduction will not be immediate, SBI has reduced its MCLR for the eighth time this financial year. Now a year later, the MCLR rate will drop from 8 to 7.9 percent. SBI claims it is the cheapest bank loan in the country.
This is the eighth consecutive cut in MCLR by SBI in FY 2019-20 and currently, SBI continues to be the cheapest loan provider in the country. SBI home loan is linked to the 1-year MCLR of the bank which will stand at 7.90 per cent from December 10, 2019.
However, the bank has not made any change in the loan linked to the repo rate. From one day to one month, the MCLR rate for loans has been 7.65 percent, MCLR rate for three months is 7.70 percent, 6 months for 7.85 percent, 8.10 percent for two months and 8.20 percent for three years. It is worth mentioning that SBI has a market share of about 25%.
The Governor of the RBI said in his monetary policy review recently that he was in no hurry to cut rates further. Between January 2014 and October 2019, the Reserve Bank cut the report by 2.85%. It has been reduced from 8 to 5.15 percent. But the banks have not yet reached their full advantage with the customer.
The reduction of MCLR will have no immediate effect on EMI on home loan interest rates. In fact, SBI’s floating rate home loans are linked to this one-year MCLR, and the rate is fixed for one year. That is, if the rate is fixed in August and then changes in MCLR can only obtained the benefit by August next year.