 "SBI cuts MCLR by 5 bps; home loans get cheaper")
State Bank of India (SBI), the country’s largest lender, has reduced by five basis points its marginal cost of funds-based lending rate (MCLR), the new benchmark to which the pricing of loans are linked.
The reduction has been done across all maturities and now the overnight MCLR stands at 8.90 per cent. With this revision, home loans have also become cheaper. Now, the rate of interest for women borrowers stands at 9.35 per cent whereas other borrowers will be charged 9.40 per cent. The new rates came into effect from May 1.
Banks have been asked to move to MCLR for pricing of loans by the Reserve Bank of India (RBI) since April this year to improve monetary transmission. This is also expected to improve bank credit in the system.
Experts believe the implementation of MCLR has the potential to channelise the recent surge of volumes in the commercial paper market towards bank credit. CP dues as a percentage of short-term bank credit went up to 14 per cent in FY16 (from 11 per cent last year) and 3-5 per cent of this, which is Rs 74,500 crore to Rs 1,20,000 crore, is likely to flow back into the banking system as rates get competitive.
Banks are expected to review their MCLR every month as per the central bank's guidelines. At present, SBI's MCLR is the lowest among it peers,