Home loans get cheaper as SBI cuts base rate by 40 bps to 9.3%

Bank will also cut deposit rates by 25 bps effective Oct 5

India's largest lender, State Bank of India has cut base rate by 40 basis points to 9.3%, making it lowest in the country. 

Base rate is the benchmark rate to which all other lending rates are linked. With this, equated monthly installments on home loans, car loans etc will come down. 

The bank has also said that it will cut deposit rates further by 25 basis points which will be effective from October 5.

This comes after Reserve Bank of India (RBI) cut its repo rate by 50 basis points to 6.75%. Repo rate is the rate at which banks borrow from the RBI. 

RBI governor Raghuram Rajan has been asking banks to pass on the reduced costs to consumers. 

In this calendar year, RBI has reduced repo rate by 125 basis points but banks, on an average, have reduced the base rate by only 25-30 basis points.

Bankers had earlier said that the increase in bad loans has been putting pressure on the margins as increasingly the interest-earning assets are slipping into the non-performing class. This in turn has deterred banks from cutting loan rates. 

However, with the 50 bps rate cut now more banks are expected to reduce their base rate.