India’s largest public sector bank State Bank of India has announced that it is bringing down the MCLR (marginal cost of lending rate) on loans across all tenors by 10 basis points with effect from Tuesday (September 10, 2019). There will be corresponding reduction in the rates of interest paid by the bank on term deposits. The reduction here is more than the drop in the interest charged on the loans.
This latest reduction in interest rates in MCLR by SBI is the bank’s fifth this fiscal and comes in the backdrop of the Reserve Bank of India (RBI) announcing rate cuts to the extent of 110 basis points over a short period of time, every time imploring the individual banks to pass on the benefit of these rate cuts to the borrowers. Some banks have heeded RBI’s directive many haven’t. This announcement by SBI could result in other banks following suit.
If you avail a one-year loan from SBI, the interest charged will now be 8.15% per annum. It used to be 8.25% p.a. The new range will span from 7.8% for a 1-month loan to 8.35% for a 3-year loan, irrespective of the type of loan you avail.
For those who currently have a home loan with SBI, this reduction in MCLR may not lower their interest rates or EMIs immediately, states a Mint report.
On the deposit side, the reduction in the interest rate on retail term deposits has been 20 to 25 basis points but not across all tenors. For instance, the rates up to 179 days and beyond 3 years have been spared. The interest rates applicable for senior citizens, which is usually 50 basis points higher have also been proportionately adjusted to the new rates.
The State Bank of India is the largest banking institution in the country with a deposit base of over Rs 28 lakh crore and advances of over Rs 19 lakh crore. The bank serves over 66 million customers through its network of over 22,000 branches.