SBI cuts MCLR by five bps to 8.4% across all tenors from July 10

This is the third rate cut announced by the SBI in the current financial year


Responding to RBI’s nudge for quicker transmission of policy rate cuts, State Bank of India reduced its MCLR by five basis points across all tenors from July 10. The Marginal Cost of funds based Lending Rate (MCLR) for one year stands reduced to 8.4 per cent per annum from 8.45 per cent per annum.

This is the third rate cut in the current financial year (2019-20). With today’s MCLR cut, the reduction in the home loan rates since April 10 is 20 bps, SBI said in a statement on Tuesday.

This is out of turn decision as now SBI revises MCLR at beginning of every month. 

Reserve Bank of India governor Shaktikanta Das on Monday said that the central bank expected a quicker transmission of the interest rate cuts by banks to consumers by way of cheaper home, auto and personal loans.

During this year, the RBI reduced the key policy rate thrice with an aggregate reduction of 0.75 percentage point in the repo rate, the rate at which RBI lends to banks.

For 50 basis point policy rate cut prior to June 6, banks had reduced interest rate by 21 basis points. Earlier it used to take six months for transmission, now the transmission is taking a much shorter period of 2-3 months, Das had said.

"RBI was collecting the data (on rate decision by banks). And banks should keep in mind that right from the month of June, in fact, June 1, the system is more than adequately surplus in liquidity," Das said.

Overall the system liquidity was hugely in surplus and if individual banks have liquidity issue, the RBI will provide liquidity support to them, Das added.