Mumbai: From July 1, 2019, State Bank of India said it will link home loan products to the Reserve Bank of India’s repo rate. State Bank of India is India’s largest public sector bank. Repo rate - the key indicator of stability or instability in the lending mechanism - is a rate at which the RBI lends money to the commercial banks in the country. In the first week of June RBI had lowered the repo rate to 5.75 per cent.
MCLR rate to continue:
The existing framework of lending home loan products following the marginal cost of funds based lending rate (MCLR) will continue along with the new framework, the SBI said. The home loan seekers will get to choose from the two types of lending rates.
Good news for home loan market:
The decision would be welcomed the big and small home loan customers as they have been making complains that banks were not transferring to the home loan buyers the benefits of RBI’s low interest rate policy. Home loan buyers will be saved from the debt trap and ‘high interest rates.’
Three successive rate cuts:
In policy reviews held since February, in April and June the RBI has cut the benchmark bank rate. To decide on the repo rate monetary policy committee (MPC) holds a bimonthly policy review meet. There was a drop of 75 bps or 0.75 per cent as the repo has now come down from 5.75 from 6.50 per cent.
After former Economic Affairs Secretary Shaktikanta Das was appointed as RBI governor, he has prioritised on liquidity and growth of the banking system. RBI governor has recommended rate cut in his first three MPC meetings.
Cash credit and overdraft:
SBI has linked repo rate to cash credit and overdraft, which will also be reduced. “The benefit of reduction in Repo Rate by 25 bps by RBI has been passed in its entirety to CC/OD customers (Limits above Rs 1 lakh) banking with us, with effect from 1st July 2019,” said SBI.
SBI has advances of over Rs 22 lakh crore and a deposit base of over Rs 29 lakh crore with Current Account Savings Account (CASA) ratio of 45.74 per cent. In home loans and auto loans, SBI has over 35 per cent of market share. The bank has 22,010 branches and over 58,000 ATM or CDM network in India. Total 1.41 crore SBI customers use mobile banking services and more than 6 crore use internet banking.