SBI home loans get cheaper, ninth cut in lending rate this fiscal

A day after Reserve Bank of India's monetary policy announcement, SBI, India's biggest bank, has cut its lending rates, making home loans cheaper. SBI has also cut its fixed deposit or FD rates. SBI today announced announced a reduction in its MCLR, or marginal cost of funds based lending rate, by 5 basis points across all tenors, with effect from 10th February. After today's rate revision, the one-year MCLR comes down to 7.85% per annum from 7.90% per annum. This is the ninth consecutive cut in MCLR by SBI in FY 2019-20, the bank said in a statement.

Home loan rates are expected to fall further as SBI said "the impact of recent RBI policy measures and reduction in deposit rates will be reflected in the next review of MCLR."

In Thursday policy review, the RBI kept its repo rate unchanged but announced many measures to boost credit, moves that may cool off interest rates further.

The RBI temporarily removed the cash reserve ratio (CRR)—which requires banks to set aside 4% of their deposits—for every new retail loan made to finance automobiles, homes, and to small businesses till 31 July. The central bank also said that it will now conduct one-year and three-year term repo auctions to inject up to ₹1 trillion into the banking system, a move that will help bank raise money at a cheaper rate.

SBI also today cut its fixed deposit rates or FD rates by 10-50 bps while also slashing bulk term deposit rates, attributing the move to surplus liquidity in the system.

SBI is the largest commercial bank in terms of assets, deposits, branches, customers and employees. It is also the largest mortgage lender in the country. As on December 31, 2019, the bank has a deposit base of over ₹31 lakh crore.

MCLR rates are based on the bank's own cost of funds. If your home loan is linked to SBI's MCLR rate, the latest cut may not bring down your EMIs immediately. MCLR-based loans typically have a one-year reset clause.