State Bank of India (SBI) on Monday reduced its marginal cost-based lending rate (MCLR) by 10 basis points. Also, the interest rates on time deposits across all maturities have been slashed by up to 25 basis points. The cut in interest rates from the state-run lender will come into effect from Tuesday (September 10, 2019) onwards. It is worth mentioning here that move marked the fifth consecutive reduction in MCLR by the country's largest bank so far this financial year.
Importantly, the reductions in interest rates from SBI comes after the Reserve Bank of India (RBI) slashed 1.1 percentage point in the repo rate - the key interest rate at which it lends short-term funds to commercial banks.
In a statement, SBI said that its one-year MCLR will be 8.15 per cent per annum from September 10, 2019. The state-run lender further said, “SBI cut interest rates applicable to retail term deposits by 20-25 bps and bulk term deposits by 10-20 bps across tenors.” In the end, SBI stated that the action was to realign its interest rates on term deposits "in view of the falling interest rate scenario".
Recently, SBI launched repo-linked home loans. Currently, the interest rate under SBI's repo-linked home loan products is 8.05 per cent. Earlier, it was 8.4 per cent. Interestingly, the reduction in SBI's repo-linked home loan products comes after RBI reduced repo rate by 35 basis points in the month of July this year.
With this, the country’s largest bank became the first bank in India to offer a home loan product in which the interest rate is linked to the Reserve Bank's repo rate. However, after SBI, other banks including PNB and Bank of Baroda launched the repo-linked home loans. In near future, many other banks are expected to offer the repo-linked home loan products.