State Bank of India (SBI), has reduced the base rate and benchmark prime lending rate (BPLR) by 30 basis points (bps) with effect from January 1 which will see a decline in EMIs (equated monthly instalments) of over 80 lakh existing customers. The base rate has been slashed from 8.95 per cent to 8.65 per cent for existing customers and BPLR from 13.70 per cent to 13.40 per cent.
The bank has also decided to extend its on-going waiver on home loan processing fees until March 31, 2018 for new customers keen on buying their house and other customers looking to switch their existing loans to SBI.
Though banks migrated to the MCLR (marginal cost of funds based lending rate) system in April 2016, most loans, particularly retail loans, remain linked to the previous base rate system. Any reduction in base rates will impact those customers.
“The reduction in base rate is a New Year gift to the bank’s loyal customers as a large number of consumers who have their loan linked to base rate will benefit by decrease in rates. This reduction is part of bank’s efforts to ensure transmission of reduction in policy rates in the recent past,” said P K Gupta, Managing Director (retail and digital banking), SBI.
Banks review MCLR on a monthly basis, while the base rate revision happens once a quarter. “MCLR was reduced earlier also as the gap between MCLR and base rate had become quite wide. This move will help in reducing that gap,” he said.
In November 2017, SBI raised interest rates on bulk deposits by 1 percentage point in certain categories. After the revision, the interest rate for deposits above Rs 1 crore and tenors of at least one year stood at 5.25 per cent. Senior citizens get an extra 50 basis points across all maturities.