Home loans are set to become cheaper as two of the largest public and private sector banks have slashed their marginal-cost based lending rate (MCLR) across different tenures.
State Bank of India (SBI), the country’s largest public sector bank, announced that it has reduced the one-year MCLR by 10 bps, effective from December 10. This brings the MCLR to 7.90% per annum from 8.00% per annum earlier. Today’s cut is the eighth consecutive cut in MCLR by the public sector bank this fiscal.
While announcing the MCLR rate cut, SBI said, “The latest rate cut is meant to pass on the benefit of its reducing cost of funds to the customers.”
In line with SBI’s move, HDFC Bank, the largest private sector bank, also announced a cut in its MCLR rates across all tenures by 15 bps. The new MCLR rate will come into effect from December 7, 2019.
As per the HDFC Bank website, the 6-month MCLR stands at 8%, 1-year at 8.15%, 2-year at 8.25% and 3-year at 8.35% after the 15 bps cut.
Earlier this month, ICICI Bank had announced a cut in its MCLR across all tenures by 10 basis points effective December 1, with its one-year MCLR at 8.25%.
The SBI and HDFC Bank move to cut their MCLR came after the Reserve Bank of India (RBI) on December 5 announced to maintain the repo rate at 5.15%.
It is important to note that the RBI has mandated commercial banks to link all new commercial loans to an external benchmark from October 2019. So any cut in MCLR announced will be beneficial for borrowers with MCLR-based loans when their annual reset date will approach.
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