The State Bank of India (SBI) on Wednesday reduced its MCLR (Marginal Cost of Fund based Lending Rate) by 10 basis points across all tenors. The new rates will be effective from 10 October 2019.

"In view of the festival season and extending benefit to customers across all segments, SBI has reduced its MCLR by 10 bps across all tenors," SBI said in a statement.

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The revision comes less than a week after the Reserve Bank of India (RBI) cut its repo rate by 25 basis points. This was the fifth straight monetary policy rate cut by the central bank where the rate was revised to 5.15% from the earlier 5.40%.

The country's largest bank has been proactive in cutting lending rates in 2019, contributing to the government and RBI's aim to push loans to increase economic activity amid the slump.

Shares of SBI fell by fell as much as 1.9% to Rs 244.35 in trade on Wednesday.

As inflation in the country remains benign and GDP (gross domestic product) growth has been the slowest in 5 years, the central bank had asked banks to make a faster transmission of repo rates in their lending products.

A cut in MCLR is good news for existing customers that have their home loans linked to it.

New loan borrowers can also opt for repo-linked home loans. RBI has made it mandatory for banks to link their lending rates to external benchmarks, such as the repo rate, for floating-rate loans from 1 October. SBI chose repo rate as its benchmark.

However, banks are allowed to charge a spread above the repo rate, which means the actual home loan rate could be several basis points higher than RBI's repo rate.