State-run State Bank of India and Bank of India have announced a cut in their marginal cost of funds based lending rate (MCLR).

SBI said it will reduce the MCLR by five basis points across tenors, effective February 10, while Bank of India will cut the rate by 10 basis points for maturities up to six months.

SBI added that it has also reduced interest rates on housing loans, which will now be available from 8 per cent, while vehicle loans will be priced at 8.50 per cent. These revisions will be effective from February 10.

According to SBI, this is the ninth consecutive cut in MCLR by the bank in the current fiscal. A statement from the country’s largest lender said with this reduction, the one-year MCLR has come down to 7.85 per cent per annum from 7.90 per cent. Home loans in the case of most banks are benchmarked against the one-year MCLR.

This reduction in MCLR comes a day after the Reserve Bank of India (RBI) left the repo rates unchanged at 5.15 per cent but announced long-term repo operations for up to Rs 1 lakh crore, making the cost of funds cheaper for banks.

SBI added that in view of surplus liquidity in the system, it has realigned its interest rate on retail term deposits (less than Rs 2 crore) and bulk term deposits (Rs 2 crore and above), effective February 10. It has slashed term deposits rates by 10-50 basis points in the retail segment and 25-50 bps in the bulk segment.

“The impact of the recent RBI policy measures and reduction in deposit rates will be reflected in the next review of the MCLR,” the bank said.

With effect from October 1 2019, banks have moved from the MCLR to an external benchmark like the repo rate to price their retail and MSME loans. However, many customers have continued with the MCLR. The RBI claims monetary transmission has improved to the sectors where the new floating rate loans have been linked to an external benchmark.