The country's largest lender State Bank of India on Monday announced a 25 basis points reduction in its external benchmark-based rate to 7.80 percent per annum from 8.05 percent per annum, effective Jan. 1, 2020.
With this cut, interest rate for the lender's existing home loan customers as well as micro, small and medium enterprise borrowers who have availed loans linked to external benchmark-based rate will reduce by 25 basis points, the lender said.
New home buyers will get loans at an interest rate starting from 7.90 percent per annum as against 8.15 percent per annum previously.
SBI had introduced floating rate home loans from July 1, 2019.
The lender had adopted repo rate as the external benchmark for all floating rate loans for MSME, housing and retail loans from Oct. 1, 2019, after the Reserve Bank of India mandated all banks to link a certain categories of loans to external benchmark-based interest rate.
The RBI decision came as there was a delay on part of banks in passing on repo rate cuts. Between February and October, India's Monetary Policy Committee cumulatively reduced repo rate by 135 basis points but the weighted average lending rate on fresh rupee loans sanctioned by banks declined by 44 basis points so far.
Banks are allowed to reset interest rates under external benchmark once in three months.
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