State Bank of India (SBI), the country’s largest lender, has reduced its marginal cost of funds based lending rate (MCLR) by a whopping 90 basis points. Among the steepest interest rate cuts in a long time, the move is aimed at boosting loan growth, which has fallen to a multi-decade low. MCLR is the benchmark rate to which all loans are linked. A percentage point equals 100 basis points (bps). According to a statement issued by the SBI, its one-year MCLR would be 8 per cent as compared with 8.9 per cent earlier. Home and auto loans of most banks, including SBI, are linked to their respective one-year MCLRs. The rate cut will be applicable to all fresh loans. The effective interest rate for new home loans is likely to be between 8.25 per cent and 8.5 per cent. Existing loans linked to the MCLR will be impacted when they are re-priced. MCLR has been in effect from April 1 and had replaced the base rate.

source: The Hindu