As part of the festival scheme offer, State Bank of India, the country's largest commercial bank, has slashed its home loan rates to 9.1 percent. The fresh cut in home loan rate is supposed to be the lowest in six years, Times of India report said.
The revised rates, effective from 1 November, comes after SBI announced a 0.15 percent cut in its marginal cost of funds based lending rates (MCLR) across tenors last week.
However, the festive scheme offering a new home loan rate of 9.1 percent is only being provided to women or loans with women as co-borrowers, the TOI report said. For other category home loan borrowers, the rate will be available at 9.15 percent.
The bank has also made it clear that all the home loans sanctioned in November and December with disbursement in a month will be eligible for the scheme.
"The rate cut will bring down the equated monthly instalment on a Rs 50-lakh loan by Rs 542 per month. Since March, the EMI has come down by over Rs 1,500." TOI report said quoting SBI MD Rajnish Kumar.
The report also claims that the new home loans rates by SBI are 20 basis point lower than ICICI Bank and HDFC, which offer cheapest home loan rate at 9.3 percent.
Not just SBI, private sector lender ICICI Bank also announced a cut of 0.10 percent in its marginal cost of funds based lending rate (MCLR) across tenors.
The announcements come after repeated displeasure shown by the regulator for not passing on the benefits of cuts to borrowers and give a boost to the sagging economic growth.
They also come ahead of the crucial "busy season" in the second half of the fiscal which sees a spurt in loan demand. Under the revised rate structure, the one-year MCLR --- which is used for calculating the rate of interest on home loans -- will come down to 8.95 percent.
The overnight and one-month MCLR will be 8.75 per cent, while the three-month MCLR has been fixed at 8.85 per cent and six months at 8.90 percent.
The MCLR was introduced from April this year as a transparent and effective alternative by the RBI, after banks refused to pass on the benefits of its rate cuts to the borrowers.
Even after the introduction of the MCLR, the central bank continues to be concerned on the issue of transmission which was flagged by Governor Urjit Patel at his maiden policy review this month. Banks are given a set formula to compute the MCLR based on cost of funds and are required to review it on a monthly basis, when the calls on the new rate structures are taken.
"I agree that the transmission through bank lending has been less than anyone of us would have liked to," Patel had told reporters.
"We are hoping that over the next quarter or two, keeping in mind the government has also reduced the small savings rates, the MCLR itself will now throw up more transmission."
Since January 2015, the Reserve Bank has reduced repo rate by 175 basis points, including the recent cut, but banks have reduced their base rates only by 60 basis points.
With PTI inputs