Home / Money / Personal Finance /  SBI home loan EMIs to fall, bank cuts external benchmark based rate

State Bank of India (SBI), the country’s largest lender, today announced a reduction in its external benchmark based rate (EBR) by 25 bps to 7.80% per annum, from 8.05% per annum. The revision will come into effect from January 1, 2020. With this reduction, interest rate for existing home loan customers as well as MSME borrowers who have availed loans linked to external benchmark based rate would come down by 25 basis points.

SBI said new home buyers will get loans at an interest rate starting from 7.90% per annum, as compared to 8.15% earlier.

SBI's external benchmark based lending rate, which is linked to RBI's repo rate (currently at 5.15%), is fixed at repo rate plus 265 basis points. SBI also charges a premium of 10 basis points to 75 basis points for pricing the effective interest on the home loan for the customer.

In October, the RBI had cut its benchmark lending rate or repo rate by 25 basis points to 5.15% , the lowest since March 2010. But in this month's review, the central bank kept interest rates unchanged.

Banks are required to reset the external benchmark based rate at least once in three months, depending on the movement of the movement of the underlying external rate like repo rate.

Earlier this month, SBI had announced a cut in one-year MCLR rate or marginal cost of funds-based lending rate by 10 bps, effective from December 10th. After the latest cut, SBI's one-year MCLR comes down to 7.90% per annum from 8.00% per annum. This is the eighth consecutive cut in MCLR by SBI this fiscal.

SBI is the largest commercial bank in India in terms of assets, deposits, branches, customers and employees. It claims to be the largest mortgage lender in the country. As on September 30, 2019, the bank has a deposit base of over Rs. 30 lakh crore with CASA ratio of little more than 45% and advances of nearly Rs. 22.5 lakh crore. SBI commands 25% market share each in home loans and auto loans, it said.

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