State Bank of India (SBI) has reduced its marginal cost of funds based lending rate (MCLR) and external benchmark rate (EBR) by 25 basis points and 40 basis points, respectively, benefiting both its existing and new borrowers.

The reduction by the country’s largest lender follows the Reserve Bank of India (RBI) bringing down the policy repo rate by 40 basis points last month. Consequently, one year MCLR, against which home loans are priced, will come down to 7 per cent from 7.25 per cent earlier.

SBI said EMIs on home loans linked to MCLR will get cheaper by around Rs 421 for a 30 year loan of Rs 25 lakh. Since the beginning of this calendar year, the lender’s one year MCLR has come down 90 basis points.

SBI has also slashed its external benchmark rate. The lender uses the RBI’s repo rate as its external benchmark for all floating rate loans in the MSME, housing and retail segments from October 1, 2019. The RBI has mandated all banks to link a certain category of loans to an external benchmark-based interest rate.

However, some of its customers, who had taken loans earlier, still remain under the MCLR regime.

SBI said EBR has now been reduced to 6.65 per cent from 7.05 per cent. The bank charges a spread or a risk premia over this benchmark rate. Last month, it had raised the spread to 35-105 basis points across various loan amounts. It could not be immediately ascertained whether it has again raised this spread.

The current changes will be effective from June 10. Apart from MCLR and EBR, State Bank has cut rates on repo linked lending rate to 6.25 per cent from 6.65 per cent. This product was launched in July 2019 and withdrawn in September that year.

Some banks such as PNB, Bank of India and UCO Bank have already slashed their lending rates linked to the repo rate and MCLR rates. Among other banks, Canara bank also announced the lowering of its repo-linked lending rate (RLLR) and MCLR by 40 basis points and 20 basis points, respectively, from Sunday across various tenors.