SBI or State Bank of India, the country's largest lender by assets, on Wednesday announced a reduction in its benchmark lending rates across shorter tenors.
State Bank of India or SBI, the country's largest lender by assets, on Wednesday announced a reduction in its benchmark lending rates across shorter tenors. The bank said its marginal cost of funds-based lending rate (MCLR) will be reduced by 5-10 basis points (5-10 percentage point), and the new rates will take effect on July 10.
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The move marks the 14th consecutive reduction in the key lending rates by SBI.
From July 10, the MCLR will stand reduced to 6.65 percent for the three-month tenor, according to SBI's statement.
A lower MCLR ideally means the EMI or the tenure of the loan should see a fall and home loan rates should become cheaper for the borrower.
However, this impact is not immediate.
There is a reset-period for MCLR based home loans, after which the rates get revised for the borrower. SBI generally offer a rest period of 1 year for MCLR-based loans. For the borrowers, this means that SBI will have to reprice the interest rates on loans after 1 year to pass on any changes in the external benchmark rate.
Borrowers whose reset date comes in July or August 2020 are likely to benefit from the recent announcement by SBI, according to experts.
The reset period is usually mentioned in the loan agreement with the bank.
The actual effective home loan interest rate also depends on the loan amount, tenure and other factors.
First Published: IST