SBI Home and Vehicle Loans to Become Cheaper After It Cuts Interest Rates From February 10, MCLR Rate Declines by 5 Basis Points

Mumbai, February 7: A day after the Reserve Bank of India maintained the status quo in its monetary policy committee (MPC), State Bank of India on Friday announced the the reduction of its Marginal Cost of Funds Based Lending Rate (MCLR) by 5 basis points across tenors. Apart from this, SBI also lowered its fixed deposit (FD) rates by up to 50 basis points (0.5 percentage point) by citing "surplus liquidity in the system". The new rates would be applicable from February 10 and expected to decrease the home loan rates for takers.

According to the latest development, the decrease of 5 basis points across tenors in MCLR by SBI would decrease the interest rate on home loans. Earlier, the SBI's one-year MCLR was 8 percent, but with this new change, the MCLR would be 7.85 percent. The new rates would be effective from February 10 onwards. This is the ninth time in FY 2010-20 that SBI had decreased its MCLR, despite RBI maintained its status quo since December after decreasing the repo rate by 135 basis points. RBI Monetary Policy: Repo Rate Unchanged at 5.15%, GDP Growth For 2020-21 Pegged at 6%.

On Thursday, RBI in its monetary policy committee didn't cut the repo rate, neither hiked it making it clear that it want the economy top boost by itself. At present, the policy repo rate is 5.15 percent. Also, in the major decision, it eased cash reserve ratio (CRR), or CR equivalent. Though this, the apex bank tried to free up high-street lenders from more resources for lending and the cost would likely to fall as well. For now, the banks need to keep 4 percent of their net demand and time liabilities (NDTL) as CRR with the central bank. Following this, banks have very less to lend to people.

With the RBI's new move in place, even private banks can lend more to buyers for housing, auto, and micro, small and medium enterprises (MSMEs). As per the latest RBI data on sectoral deployment of bank credit, home loans, loans to MSMEs and vehicle loans accounted for 22.4 percent of gross bank credit as of end December 2019. For the ease of readers, Marginal Cost of funds based Lending rate (MCLR) refers to the minimum interest rate of a bank below which it cannot lend, except in some cases allowed by the RBI. It is an internal benchmark or reference rate for the bank.

(The above story first appeared on LatestLY on Feb 07, 2020 02:07 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).