Relief for Borrowers: SBI Slashes Loan Rates Amid RBI’s Growth Push

In the wake of the Reserve Bank of India’s recent repo rate cut, the State Bank of India (SBI) has swiftly reduced its lending rates, making loans more affordable for millions of Indians. While borrowers stand to gain from lower EMIs on home loans and car loans, fixed deposit holders face declining interest income, highlighting the dual impact of the rate adjustment.

Lending Rates Slashed to Ease Borrowing Costs

On December 15, SBI announced a reduction in its External Benchmark Linked Rate (EBLR) by 25 basis points, bringing it down to 7.90 per cent. This move benefits both new and existing borrowers, reducing the cost of loans across the board.

The Marginal Cost of Funds-based Lending Rate (MCLR) was also reduced by 5 basis points across all durations, with the one-year MCLR now at 8.70 per cent, down from 8.75 per cent. Additionally, the Base Rate and Benchmark Prime Lending Rate (BPLR) have been marginally lowered from 10 per cent to 9.90 per cent, providing further relief to borrowers.

Fixed Deposit Rates Take a Hit

While lending rates have decreased, fixed deposit holders have been affected by the drop in deposit rates. For deposits with durations between two and less than three years, SBI has cut rates by 5 basis points to 6.40 per cent. The 444-day ‘Amrit Vrishti’ scheme has seen a larger reduction of 15 basis points, bringing the rate to 6.45 per cent, while other tenure buckets remain unchanged.

An SBI spokesperson explained that these adjustments are part of the bank’s commitment to pass on the policy benefits to customers, noting that while borrowers benefit immediately, depositors may need to reassess their investment strategies.

Other Public Sector Banks Follow Suit

The Indian Overseas Bank (IOB) has also responded to the repo rate cut by reducing its Repo Linked Lending Rate (RLLR) by 25 basis points to 8.10 per cent. MCLR has been lowered by 5 basis points for durations ranging from three months to three years.

These moves are expected to help retail customers save on EMIs for homes, vehicles, and personal loans while providing businesses, including MSMEs and corporates, smoother working capital access.

Impact on Borrowers and the Economy

With the festive season drawing to a close and the new year approaching, lower lending rates present an opportunity for consumers to borrow more, potentially boosting spending and stimulating economic growth.

However, retirees and fixed deposit investors are prompted to rethink their investment portfolios in light of declining deposit returns. As inflation slows, questions remain about whether further rate cuts will follow, offering additional relief to borrowers.

For now, borrowers can enjoy lower interest rates and manageable EMIs, marking a temporary respite in India’s lending landscape.