New home loans from country's largest bank State Bank of India will be cheaper by 10 basis points under revised loan pricing regime that kicks in from tomorrow.
Under the Marginal Cost of Funds based lending Rate (MCLR) regime, SBI's benchmark rate would range between 8.85% (for overnight) to 9.35% (for three years).
Reserve Bank of India prescribed new system to improve transmission of monetary policy. Instead, of one benchmark rate, banks would indicate alteast five benchmark rates varying according to tenures.
Starting with a rate for overnight tenor, banks would quote rate for one month, three month, six months and one year buckets. RBI has left it to banks for giving more rates for longer tenures.
Anshula Kant, chief finance officer and deputy managing director, SBI said MCLR rate for one year tenor will be 9.20%.
At present home loan rate is 9.55% (base rate of 9.3% plus 25 basis point premium for home loan). Under revised regime, it could be with MCLR for one year - 9.2% plus 25 basis point premium gives rate will 9.45 basis points for home loans sanctioned from April one.
Existing home borrowers would get option to move to new rate. They will be charged small switch fee that would be announced soon. Their would be savings of Rs 600 in Equated Monthly Installment (EMI) on one year loan, Kant said.
This tenor (one year) will be most crucial for bank as more than 30% of deposits have maturity of around one year. The change in deposit rates for this bucket would drive revision in the MCLR rates.
The deposit rates are expected to slide further in the next financial year depending on the liquidity conditions in the market.
Asked about revision in interest rates on deposits, SBI CFO said the annual monetary policy for 2016-17 is round the corner and bank would review rates after RBI announces policy on April 05, 2016. At present SBI's term deposits range between lowest at 5.25% at short end to highest 7.5% for 456 days to less than three years.
