India’s biggest bank State Bank of India or SBI has cut its benchmark lending rates by 5 basis points across all tenors, making home, auto and other loans linked to the benchmark rate cheaper. The marginal cost of fund-based lending rate, or the MCLR, was lowered to 8.50% for the one-year tenor, down from 8.55%, SBI said in a statement. The move comes days after the Reserve Bank of India (RBI) cut its policy interest rate by 25 basis points to 6%, in a move to boost the economy.
From 1st May, the interest rate on large SBI savings accounts (balances above ₹1 lakh) and other short-term loans like overdraft will also get revised.
SBI also reduced the interest rate on housing loans of up to ₹30 lakh by 10 basis points. The applicable interest rate for SBI housing loans below ₹30 lakh will range from 8.60% to 8.90%, from existing rates of 8.70% to 9%.
On Monday, the largest private sector bank HDFC Bank Ltd had reduced its MCLR by 5-10 basis points. The private sector lender’s one-year MCLR stands revised at 8.7%.
Starting 1 May, SBI will link savings bank deposits above ₹1 lakh and short-term loans like overdraft with RBI’s repo rate in a move to improve interest rate transmission for consumers. SBI on 8 March announced the linking of savings bank account deposits (above ₹1 lakh) and short-term loans to the RBI’s repo rate. This will come into effect from 1st May.
With SBI linking rates for such deposits and loans to the repo rate, the interest rate you were paying on a short-term loan like overdraft or cash credit will also come down by 25 bps. So will be the automatic revision of interest rate on savings accounts with balances above ₹1 lakh (275 bps below repo rate) which will fetch 3.25% interest rate from May 1.
SBI savings bank account customers for balances up to ₹1 lakh will continue to get 3.50%. 95% of savings bank account holders fall into this category, SBI says.