Public sector State Bank of India (SBI), Bank of India (BOI) and private sector HDFC Bank (HDFC Bank) have cut the marginal cost-based interest rate of funds of various duration funds by 0.20%. This will make all types of loans cheap.
SBI, while reducing the marginal cost-based lending rate (MCLR) by 0.10%, said that now the new one-year rate will be 7.90%. It is now 8%. On the other hand, HDFC Bank sources said that the bank has reduced the MCLR by 0.15%. According to the bank’s website, the MCLR has now come down to 8.15% for a period of one year.
Bank of India has cut the MCLR-based interest rate by 0.20% for a day, while by 0.10% over the longer term. The new SBI rates will be applicable from 10 December, while HDFC Bank has implemented them from 7 December.
Auto loans linked to MCLR will also become cheaper. However, its benefits will not be available immediately. SBI has cut its MCLR for the eighth consecutive time in this financial year. Now its one-year MCLR rate will be reduced from 8 to 7.9%. SBI claims that it is the cheapest loan lending bank in the country.
However, the bank has not made any change in the loan related to the repo rate. For loans ranging from one day to one month, the MCLR rate has gone up to 7.65% for three months, 7.70% for six months, 7.85% for six months, 8.10% for two years and 8.20% for three years. Significantly, SBI has a market share of about 25% in home loans and auto loans.
It is worth noting that the RBI Governor Shaktikanta Das had recently said in his monetary policy review that he was not in a hurry to cut further rates. Between January 2014 and October 2019, the Reserve Bank has reduced the repo rate by 2.85% from 8 to 5.15%. But the banks have not yet passed their full benefits to the customers.
Decreasing MCLR will not affect the home loan interest rate or EMI immediately. Basically, the floating rate for a home loan of SBI is linked to this one-year MCLR and the rate is fixed for one year. That is, if the rate is fixed for someone in August and, after that, there is a change in the MCLR, then its benefit will be available only till next year that is next August.