State Bank of India reduced its marginal cost of funds-based lending rate (MCLR) by 25 basis points (bps) for all Tenors
- Effective from 10 June, the one-year rate comes down to 7%.
- This is the bank’s thirteenth consecutive MCLR reduction.
- Interest rates have been falling for over a year now and the central bank recently reduced its repo rate by 115 bps since end of March.
- The bank adds that the reduction in MCLR will not affect retail loans disbursed after 1 October, when banks moved to an external benchmark as directed by the Reserve Bank of India’s (RBI).
- RBI guidelines says that banks are at liberty to move between the repo rate, or the yield on three-month or six-month treasury bills, or any other benchmark rate published by the Financial Benchmarks India Pvt. Ltd (FBIL).
- The move will help existing retail SBI customers who borrowed before October 2019, and corporate loans which are yet to move to an external benchmark.
- The bank also added that it is passing on the 40-bps repo rate cut announced by RBI on 22 May to its borrowers availing loans linked to the external benchmark linked lending rate (EBR) as well as repo linked lending rate (RLLR).
- From 1 July, the EBR will stand reduced to 6.65% and the RLLR will stand reduced to 6.25%. This reduction will benefit retail and small business borrowers.
- This will inturn result in the equated monthly instalments (EMIs) on eligible home loan accounts linked to MCLR becoming cheaper by approximately ₹421 and those linked to EBR/RLLR getting cheaper by around ₹660, for a 30 years loan of ₹25 lakh.
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