SBI cuts base lending rate, loans to get cheaper

State Bank of India (SBI), the country’s biggest bank, today announced a reduction in its base lending rates, the MCLR, or marginal cost of fund based lending rate, making loans cheaper. 

SBI cut its MCLR or by 5 basis points across all tenors, its seventh consecutive cut in lending rates in FY 2019-20. After the rate cut, SBI's one-year MCLR will come down to 8 per cent per annum. The latest rate cut is effective from 10 November 2019.
The one-year MCLR is the benchmark against which most retail loans such as home loan and auto loan are priced. HDFC Bank had earlier this week cut marginal-cost based lending rate (MCLR) for various tenors by up to 10 basis points (bps).
SBI also lowered its term deposit or fixed deposit (FD) rates for select maturity. The MCLR is closely linked to the bank's actual deposit rates. That is why for a home loan which is linked to one-year MCLR, the interest rate will get reset only after completion of one year.
As per the latest revision in deposit rates, FD rates will be lower by 15 basis points for deposits for one year to less than two years maturity.
SBI also slashed bulk deposit rates by 30-75 bps across tenors. The bank cited adequate liquidity in the system for lowering FD rates.
The Reserve Bank of India so far this year cut repo rate by a cumulative 135 basis points. Many banks have linked their retail lending rates to an external benchmark as prescribed by the central bank and even lowered the marginal cost of funds-based lending rate (MCLR).
SBI also has a repo rate-linked home loan product under which it charges a spread of 265 basis points over the RBI's repo rate (currently at 5.4 per cent) to calculate its external benchmark-based lending rate, which comes to 8.05%. SBI also charges a premium for calculating effective home loan rate for customers.