The State Bank of India (SBI) has recently revised its marginal cost of funds-based lending rate (MCLR), effective from October 15 to November 15, 2024. This adjustment is pivotal for borrowers as it reflects a changing landscape in the banking sector and offers opportunities for savings.
Key Changes to MCLR
SBI has reduced the one-month MCLR by 25 basis points (bps), lowering it from 8.45% to 8.20%. This adjustment positions the overnight MCLR at 8.20%, while the three-month MCLR remains unchanged at 8.50%, the six-month at 8.85%, and the one-year MCLR now stands at 8.95%. The two-year and three-year MCLRs are fixed at 9.05% and 9.1%, respectively. These changes can significantly affect monthly payments for loans tied to these rates, particularly for new borrowers.
Understanding MCLR
The Marginal Cost of Funds-Based Lending Rate (MCLR) is the minimum interest rate below which banks are prohibited from lending, barring certain exceptions permitted by the Reserve Bank of India (RBI). A decrease in the MCLR can lead to lower equated monthly installments (EMIs) for borrowers, making loans more accessible and affordable.
Implications for Home Loans and Other Rates
As of September 15, 2024, SBI’s base rate stands at 10.40%, with the Benchmark Prime Lending Rate (BPLR) at 15.15%. For home loans, the External Benchmark Lending Rate (EBLR) is linked to the RBI’s repo rate, currently at 9.15%, resulting in interest rates ranging from 8.50% to 9.65%, depending on the borrower’s credit score. These rates are crucial for potential homeowners looking to secure financing.
A Shift in the Banking Landscape
SBI’s decision to reduce its MCLR follows a similar move by HDFC Bank, which decreased its three-month MCLR in September. This trend reflects a broader banking strategy aimed at attracting borrowers amid evolving economic conditions. For potential borrowers, this is an opportune moment to reassess loan options, as lower MCLR rates may lead to significant savings over time.
