After the RBI reduced its benchmark repo rate by 25 basis points to 6.25% in its sixth bi-monthly policy review meet on Thursday, State Bank of India in line reduced interest rates on its home loan offerings of up to Rs. 30 lakh by a marginal 5 basis points. 1 basis point is one-hundredth of a percentage point.
State Bank of India has the highest share of the home loans market and it's appropriate to empower the large lower and middle class segment by transmitting the rate cut announced by the RBI, said Chariman Rajnish Kumar in a statement.
To bring about lending rate cut under the marginal cost of funds-based lending rate system (MCLR), a reduction in deposit rates will have to be done. And in comparison to peers, the largest state-run lender offers much lower deposit rates
For effecting a rate cut in home loans, the bank will either have to decrease its one year MCLR or can go for a cut in its spreads over MCLR for the product, he said.
The new rates will come into effect from Friday.
Also on the sidelines, Bank of Maharashtra reduced its MCLR for 6-months loan tenure by 0.05%.