Fretting over home loans? SBI cuts interest rates of up to Rs 30 lakh

New Delhi: State Bank of India (SBI) has lowered interest rates on home loans of up to Rs 30 lakh by 9 basis points, a day after the Reserve Bank of India's (RBI) monetary policy committee (MPC) unexpectedly slashed the repo rate by 25 basis points to 6.25 percent in 42 votes.

"On the back of the monetary policy announced by the RBI, we have taken the lead to cut interest rates on home loans up to Rs 30 lakh," SBI chairman, Rajnish Kumar, said in a statement. The new rates took effect from Friday.

Deposit rate cut not possible

Kumar said SBI, the country's biggest lender by assets, has the highest market share of the home loans market. With SBI's deposit rates lower than most other banks, he added that since a deposit rate reduction was not possible, a cut in the benchmark lending rate or the MCLR (Marginal Cost of Funds based Lending Rate) was unlikely.

The bank would either have to decrease its one-year MCLR or reduce its spreads over MCLR for the product to effect a rate cut in home loans, he said. Kumar added that the bank is not expected to implement the external benchmark rate which the RBI wants to implement by April.

Soon after RBI's decision to slash the repo rate, state-run Bank of Maharashtra had announced a 0.05 percent cut in its MCLR for a sixth-month loan tenor. RBI Governor Shaktikanta Das had said he will speak to lenders to smoothen the transmission of the policy rates in a meeting likely to be held in the coming two-three weeks.