The Reserve Bank of India (RBI) has already announced its latest monetary policy and State Bank of India (SBI) has cut lending rates once again, enabling considerably affordable home loans for customers. State Bank of India (SBI) has also lowered its FD (fixed deposit) interest rates in turn. The bank has also confirmed a reduction for its marginal cost of funds based lending rate or MCLR by 5 basis points throughout all tenors. This will be effective from the 10th of February, 2020.
The 1-year MCLR at SBI now stands at 7.85% per annum as compared to 7.90% per annum. This is the 9th consecutive cut for the MCLR at State Bank of India (SBI). Rates of home loans are expected to come down considerably in the future based on the recent policy measures taken by the RBI and lowering of deposit rates will be reflected in the next MCLR review. The RBI has kept the repo rate at the same threshold although several new measures have been declared for enhancing credit along with decisions that will lead to a cooling off for interest rates even further.
What else should you know?
The RBI (Reserve Bank of India) has temporarily done away with the CRR (cash reserve ratio) which necessitates that banks should put aside 4% of deposits for each new retail loan made for homes, automobiles and small businesses till the 31st of July, 2020. RBI has also stated that it will be holding 1-year and 3-year term repo auctions for infusing a whopping Rs. 1 trillion into the Indian banking system which will enable banks to raise more money at comparatively affordable rates.
SBI has also reduced FD rates by 10-50 basis points while also reducing rates for bulk term deposits. SBI is the biggest Indian commercial bank with regard to deposits, assets, customers, branches and employees along with being the biggest mortgage lender in India. As of the 31st of December, 2019, it already has a deposit base crossing Rs. 31 lakh crore. MCLR rates are based on the cost of funds of the bank and in case the home loan is tied to the MCLR rate at SBI, the latest reduction may not lower EMIs instantly. MCLR based home loans usually come with a reset period of 1 year.
Other rate reductions in the offing
Other PSBs (public sector banks) have also announced a reduction in loan interest and deposit rates. Bank of India (BOI) has already lowered interest rates on home loans and lending rates now start from 8% onwards. It has also lowered the MCLR by 10 basis points for all bank deposits possessing maturity up to a period of 6 months. OBC (Oriental Bank of Commerce) has lowered its MCLR by up to 10 basis points for several tenors. This will be implemented from 10th February, 2020. It has kept the 1-year MCLR unchanged at 8.15% while the 1-month and overnight rate have been lowered by 10 basis points and 5 basis points respectively.
Canara Bank has lowered its MCLR for a 1 year period by 15 basis points and this is effective from 7th February, 2020. This cut of 15 basis points in the MCLR across several tenors has led to changes for bank deposits likewise. The rates of interest on one-month and overnight loans have come down to 7.65% and they are 7.95% for a three month tenor. The interest rates are also 8.10% and 8.20% for six-month and one-year tenors.