State Bank of India (SBI), the country's largest lender, has announced a reduction in its MCLR or marginal cost of lending rate by 5 basis points or bps (0.5 percentage point) across all tenors. With this announcement, MCLR will come down to 7.85 percent per annum from 7.90 per annum, with effect from February 10, 2020.
Live TV
Loading...
The announcement by SBI came a day after RBI kept the repo rate unchanged at 5.15 percent in its February policy.
This is the ninth consecutive cut in MCLR by SBI in the current financial year. The bank has slashed the MCLR by 70 bps between February 2019 and February 2020, according to the information available on its website. In December 2018, SBI's 1-year MCLR was 8.50 percent, while in December 2019, it came down to 7.90 percent.
What lower MCLR means for customers
A lower MCLR means the EMI or the tenure of the loan will see a fall. This means home loan rates will become cheaper for the borrower. However, the impact is not immediate. There is a reset-period for MCLR based home loans, after which the rates get revised for the borrower. Banks generally offer a rest period of six months or 1 year.
Borrowers whose reset date comes in February or March 2020 are likely to benefit from the recent announcement by SBI, according to experts.
The actual effective home loan interest rate also depends on the loan amount, tenure and other factors.
How SBI's home loan rates compare with other banks' rates
While SBI has announced the reduction in MCLR, HDFC bank last revised the marginal-cost based lending rate on loans for all tenors in December. The one-year MCLR rate for the bank stands currently at 8.15 percent.
ICICI Bank reduced its MCLR in January by 5 bps across all tenors. The bank's one-year MCLR now stands at 8.2 percent. This means SBI's one-year tenor MCLR is the lowest among these banks.
RBI's recent announcement and loan rates
While keeping rates on hold in its February policy, RBI targeted measures such as cash reserve ratio (CRR) leeway for fresh retail and MSME loans, one-time permission to extend restructuring of MSME loans and concessional 1-3 year repo funds. The MPC also left the door open for further rate cuts.
(Also read: How RBI has made loans cheaper without a rate cut)
The RBI also said that loans by banks to medium enterprises will be linked to an external benchmark, effective April 1, 2020.
In October 2019, RBI had made mandatory for banks to link all new floating rate personal or retail loans and floating rate loans to micro and small enterprises to an external benchmark.
First Published: Feb 7, 2020 3:41 PM IST
Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!
Dharamshala Assembly bypoll: BJP rebel in fray, straight contest turns into three-way fight
May 23, 2024 2:52 PM
Not invited to any BJP rallies, events, meetings — Jayant Sinha's reply to showcause notice
May 23, 2024 12:58 PM