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State Bank of India (SBI) announced a reduction of 15 basis points in its marginal cost of lending rate (MCLR) across all tenors.  The one-year MCLR has now come down to 7.25% from 7.4% and the rate is effective from May 10, 2020, the bank said in a press release on 7th May.

The bank has also introduced a new product in the retail term deposit segment, ‘SBI Wecare Deposit‘ for senior citizens which offers a 30 basis points hike to the existing interest rate in the segment.

This is applicable only to those deposits that have a tenor of five years or more. The effective interest rate now for this category is 80 basis points higher than the interest rate offered to the general public on their term deposits.

Earlier senior citizens would get only a 50 basis points premium to the rate offered to the general public. This is a new product and is in effect up to September 30, 2020, only. 

In another announcement, the bank has also slashed the interest rate offered on retail term deposits by 20 basis points for up to a 3-year tenor. 

This is effective from May 12, 2020, and has been done to maintain “adequate liquidity in the system as well as with the bank”.

How Does This Impact You?

MCLR cut: EMIs for all your home loans that are linked to MCLR will get cheaper, ultimately benefiting you in such testing times. As an example, SBI said in its statement that EMIs on eligible home loan accounts will get cheaper by approximately Rs 255 for a loan of Rs 25 lakh that has a 30-year tenure. 

However, if your home loan is linked to MCLR, then the 15 basis points cut in MCLR will not show up in your EMIs immediately.

This is why!

MCLR linked loans have a one-year clause. This means that if your loan is linked to the 12-month MCLR, any change will be reflected in your EMIs and loans only after a period of 12 months.

Term deposits: If you hold a term deposit with SBI which has a tenor up to three years, you may receive lesser interest on your deposit, effectively reducing your income from these deposits.  Fixed deposits and recurring deposits are all types of term deposits hence effectively this cut in interest rate will impact your FDs and RDs. Currently, SBI’s fixed deposits with a tenure of 1-3 years are offering an interest rate of 5.7%.

Current SBI FD Rates (effective May 12, 2020)

Following are the interest rates applicable for deposits below Rs 2 crore:

 

TenorsExisting Rates for Public w.e.f. 28.03.2020Revised Rates For Public w.e.f. 12.05.2020Existing Rates for Senior Citizens w.e.f. 28.03.2020Revised Rates for Senior Citizens w.e.f. 12.05.2020
7 days to 45 days3.503.304.003.80
46 days to 179 days4.504.305.004.80
180 days to 210 days5.004.805.505.30
211 days to less than 1 year5.004.805.505.30
1 year to less than 2 year5.705.506.206.00
2 years to less than 3 years5.705.506.206.00
3 years to less than 5 years5.705.706.206.20
5 years and up to 10 years5.705.706.206.50

SBI is the largest lender in the country. It has the largest network of 21,959 branches in India. SBI has a market share of 34% in the home loans segment and 34.86% share in the auto loans segment. The bank’s scrip ended 0.2% lower at Rs 170 per share at the end of today’s (7th May’s) trading session.

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