Loan customers of the country's leading state run lender SBI have a reason to cheer as their EMIs against different retail loan account linked to MCLR or marginal cost based lending rate may be slashed in some time. This is as the lender has decided to shift to 6-month MCLR rate as against the current 1-year rate.
This would undoubtedly translate into a rate cut for loan portfolio worth Rs. 8 lakh crore. For new loans, the rate will be pegged to external benchmark-based rate
"While all new borrowers are taking benefit of the series of rate cuts, our MCLR borrowers have to wait for reset date," the publication quoted J Swaminathan, deputy managing director, finance, SBI as saying. "When cuts are happening every two months, customers have to wait for reset date. So we decided to change our benchmark to six-month MCLR. This will lead to much faster policy rate transmission as rates will reset faster." SBI customers were earlier only allowed to reset loans once a year.
This change in MCLR rate to six-month will benefit floating rate borrowers. But short term borrowers or those have borrowed funds under fixed rate will not benefit.
For renewal, the benchmark followed will be six-month MCLR. And customers wishing to get the reset done will be able to get so done at a small cost. At present, SBI's six-month MCLR is 6.95% while one-year rate is 7%. So by opting to the six-month MCLR customers will directly see a reduction in their loan tenor.
Almost 70% of the SBI's loan book is linked to MCLR rate and hence a huge borrower base will benefit from the move.