State Bank of India, the country’s largest lender, has reduced the one-year marginal cost of funds based lending rate (MCLR) by 10 basis points (bps) to 7.9%, with effect from Tuesday.
SBI said the lending rate was reduced to pass on the benefit of reduction in cost of funds to customers. “This is the eighth consecutive cut in MCLR in the financial year 2019-20,” SBI said.
The rate cut will bring down equated monthly instalments of SBI’s existing home loan borrowers and other floating rate loan borrowers. All the banks have linked the home loan rate of new borrowers to the repo rate.
Last week, the Reserve Bank of India, while keeping the policy interest rate unchanged, said one of the reasons behind the decision was inadequate transmission of monetary policy. In response to the 135 bps repo rate reduction by the RBI since February, one-year median marginal cost of funds-based lending rate has declined by only 49 basis points.
