State Bank of India (SBI) on Tuesday reduced the marginal cost of funds based lending rate (MCLR) by 35 basis points across all tenors.

Most consumer loans are linked to MCLR, and this is one of the sharpest cuts in MCLR announced by the country’s largest lender in recent times, to be effective from April 10. SBI’s move is likely to be followed by its peers as well.

However, there was some disappointment for the over 44 crore saving bank account holders as the lender reduced interest rates on deposits by 25 basis points. The revised interest rates will come into effect from April 15. This is the second time in less than one month that SBI is reducing the saving bank interest rates. SBI said this decision was taken in view of adequate liquidity in the system.

Following the latest revision, for balances up to Rs 1 lakh and more than Rs 1 lakh, the revised interest rate will stand at 2.75 per cent. Before March, the interest rates stood at 3.25 per cent and 3 per cent, respectively.

Earlier this month, ICICI Bank had also brought down the interest rates on saving bank accounts to 3.25 per cent (from 3.50 per cent earlier) for balances below Rs 50 lakh and 3.75 per cent for balances above Rs 50 lakh.

The cut in MCLR comes after the Reserve Bank of India (RBI) last month brought down the policy repo rate by 75 basis points to 4.40 per cent. In a statement, SBI said that following Tuesday’s cut, the one-year MCLR will come down to 7.40 per cent from 7.75 per cent.

According to SBI, equated monthly instalments (EMIs) on eligible home loan accounts (linked to the MCLR) will get cheaper by around Rs 24 per Rs 1 lakh on a 30-year loan.

SBI had fully passed on the repo rate changes by the RBI to its borrowers by reducing the external benchmark rate (EBR). It had adopted the repo rate as the external benchmark for all floating rate loans for MSME, housing and retail loans from October 1 after the RBI mandated all banks to link a certain category of loans to an external benchmark-based interest rate.

Banks are allowed to reset interest rates under an external benchmark once in three months.

Following the latest revision, for a salaried borrower, the effective interest rate on a Rs 30 lakh will come to 7.20 per cent. For loans above Rs 30 lakh and up to Rs 75 lakh, the effective rate stands at 7.45 per cent with effect from April 1.