SBI cuts lending rates; what does it mean for your home loan EMIs

State Bank of India (SBI) has reduced the MCLR (Marginal Cost of Funds based Lending Rate) by 10 basis points. This will be effective from tomorrow, September 10. The bank said announcing the third rate reduction in the current fiscal year.

One year MCLR, to which all the retail lending rates are linked to, has been reduced to 8.15 percent from 8.25 percent earlier. Moreover, it also slashed retail term deposit rates by 20-25 bps and bulk term deposit rates by 10-20 bps across tenors, effective tomorrow. There is some technicality in the reduction that needed to be understood for those who are paying home loan EMIs.

What does it mean for home loan consumers?

If you are an existing home loan consumer for SBI then your interest rate will not reduce until August 2020 as the decision will be effective by September 10 this year. Which means, it will have a one-year reset clause. Meaning, if the reset clause is in August and the MCLR cut happens in September then home loan rate will not change until next August.

Interest rate on SBI’s home loan products may fluctuate as it is linked to RBI’s repo rate. The changes depends on the movement of RBI's repo rate. On the other hand, the bank also charges above the repo-linked lending rate for the loan linked to SBI's own repo-linked lending rate.

(Inputs from PTI)

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