Mumbai: State Bank of India (SBI) and HDFC Bank on Monday reduced their base rates by 15 basis points and 25 basis points, respectively, bringing relief to those who have taken loans before April 2016.
SBI reduced base rate to 9.10% effective from 1 April compared to 9.25% earlier. HDFC Bank reduced its base rate by 25 basis points to 9%.
The Reserve Bank of India (RBI) announced marginal cost of funds-based lending rate (MCLR) in April last year whereby borrowers were given loan based on this benchmark. It is the new benchmark lending rate where fund costs are calculated through a weighted average. Under base rate, fund costs are calculated through average cost.
Loans issued before April last year are tied up to base rate cost of accounting. Reduction in base rate will help existing borrowers.
Both six-month and three-year MCLR stood unchanged at 7.95% and 8.15%, respectively for SBI.
The large inflow of deposits spurred by the demonetisation of high-value bank notes led to a significant reduction in the lending rates offered by the banks. In January, SBI cut its marginal cost of funds-based lending rate (MCLR) across all tenors by 90 basis points, the steepest cut in several years.