The country’s largest public sector bank, State Bank of India (SBI) Has given a big relief to crores of its customers. The bank has Marginal Cost of Funds Based Lending Rate (MCLR) Has changed. This change has special significance for those customers who have taken home loan, auto loan, or other types of loans.
How will this move affect the monthly EMIs of customers? Will the burden on your pocket be less? Come, let us know every important information related to this update.
What is MCLR and why is it important?
MCLR (Marginal Cost of Funds Based Lending Rate) It is the minimum interest rate at which the bank gives loans to its customers. This rate directly affects your loan EMI.
Importance of MCLR:
- Effect on loan interest rate: On the basis of MCLR, the bank decides the interest rate for its customers.
- Determining EMI: Changes in MCLR have a direct impact on your monthly EMI.
- Connection to repo rate: MCLR is generally influenced by the repo rate set by the Reserve Bank of India (RBI).
If the bank reduces the MCLR, it may mean that your EMI may reduce, which will bring some relief to your financial situation.
How much did SBI change MCLR?
SBI has revised its MCLR rates, but this time the change is not uniform for all tenures. the bank has MCLR cut for some specific period While other rates have been kept constant.
SBI’s new MCLR rates (effective from January 16, 2025):
- Overnight MCLR: 7.95% (no change)
- 1 month MCLR: 8.10% (no change)
- 3 Month MCLR: 8.15% (no change)
- 6 months MCLR: 8.45% (reduction of 0.05%)
- 1 year MCLR: 8.50% (deduction of 0.05%)
Impact on loan customers:
- Reduction in MCLR of 1 year The direct benefit will be to those customers who have taken home loan or long term loan.
- The possible impact on EMI will be only for those customers whose loan interest rate is linked to MCLR.
Will your EMI be less?
Due to reduction in MCLR by SBI Home Loan, Personal Loan, and Auto Loan Customers may get relief. However, the benefit of reduction in EMI will be available only to those customers whose loan interest rate is based on MCLR.
Impact on EMI:
- New Loan Customer: Customers who are thinking of taking a new loan will get the benefit of lower interest rates.
- Old Loan Customers: If your loan is linked to MCLR, your EMI may be reduced. However, if your loan is linked to the repo-linked rate (RLLR), this change will not have any impact.
For example:
If you have taken a home loan of ₹30 lakh for 20 years and the MCLR rate is reduced by 0.05%, your EMI may reduce by around ₹200-₹500.
Why is this step of SBI special?
SBI’s decision to cut MCLR has come at a time when RBI has not announced any change in the repo rate. This step is being considered as part of the strategy to provide relief to customers and further expand the loan portfolio of the bank.
Its widespread impact:
- Savings to customers: Due to reduced EMI, there will be less pressure on the pockets of customers.
- Increase in loan demand: Demand for taking loans may increase due to lower interest rates.
- Market Competition: This step of SBI may inspire other banks to reduce their rates.
What should SBI customers do?
If you are an SBI customer and your loan interest rate is MCLR based, you can take the following steps to avail the reduction in your EMI:
1. Know the type of interest rate:
Check your loan document and know whether your loan is MCLR based or repo-linked rate (RLLR).
2. Contact the Bank:
If your loan is MCLR based, contact the bank and ask to recalculate the EMI as per the new rates.
3. Consider Balance Transfer:
If your loan is with another bank and the interest rate is higher, consider balance transfer at SBI’s new rates.
Relief or limited impact for customers?
This initiative of SBI will definitely provide some relief to the customers, especially those who have long term home loans. However, it is important to note that the MCLR reduction has been made only by 0.05%, which will not make a big difference in EMI.
- SBI official website
- RBI repo rate updates
