EMI reduction on SBI home loans, cuts MCLR twice in a Month


In SBI the one-year Marginal Cost of Funds Based on Lending Rate (MCLR) against which home loans are benchmarked has come down to 7% per annum. Last year SBI had announced a cut in the interest rate offered on savings bank accounts. The bank has announced another cut in its lending rates, making EMIs on loans tied to its MCLR cheaper. The lender has reduced MCLR by 25 bps with effect from June 10, 2020. This is the second such reduction in a month. The one-year MCLR, against which home loans are benchmarked, comes down to 7% from 7.2 – 5% per annum. After the latest reduction, EMIs on eligible home loan account linked to MCLR, for example, 30-year Rs. 25lakhs loans will get cheaper by Rs.421. SBI also reduced its base rate by 75 bps, from 8.15% to 7.40%, with effect from 10th June 2020.

According to the SBI, if the customer is a current home loan borrower, the home loan interest rate will not bring down if the bank cuts the basis point of 25 on MCLR. If the customer’s SBI floating rate home loan is linked to MCLR they will have a reset clause and from that date, the new rates will become applicable. Further, the SBI has also taken place the full 40 bps repo rate cut to its borrowers. These loans are connected to an external benchmark linked lending rate (EBR) and also to the repo linked lending rate (RLLR). This repo rate cut was announced by Reserve Bank of India on 22nd May 2020. 

Therefore, SBI’s external benchmark linked lending rate will get decreased from 7.05% to 6.65% per annum from 1 June 2020. SBI mentioned that home loans linked to external benchmark linked lending rate (EBR) or Repo linked lending rate (RLLR) will receive cheaper by around Rs. 660, for a 30-year loan of Rs.25 lakh. In previous month SBI had declared a 5-basis-point cut in savings deposit interest rates to 2.70%. This shows the SBI’s second reduction in their interest rates on savings bank deposits in this fiscal. In the month of April, the bank had cut savings bank deposit rates by 25 basis points (bps) to 2.75%. Approximately 21.8% of SBI’s retail borrowers have benefited the three-month moratorium on repayments from the month of March to May which was offered by SBI.  


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