Equated monthly instalments (EMIs) are set to fall with banks announcing a cut in their lending rates. The country’s largest lender, State Bank of India (SBI) led the way cutting the interest rate on its loans by 5 basis points (bps).

As a result, the one year marginal cost of funds based lending rate (MCLR) of SBI — to which most loans are linked — will now drop to 8.5%.

IOB said it would reduce its MCLR by 5 bps for loans of various tenures from April 10.

As a result, housing and vehicle loans would become cheaper, the bank said in a filing. The revised interest rates would be 8.65% for loans up to one year tenure, 8.75% for two-year and 8.85% three-year loans respectively. The moves come after the RBI decided to cut the repo rate by 25 bps to 6% last week.

Since February, the repo rate had been reduced by 50 bps though SBI had reduced its MCLR by only 5 bps during this period.

Private sector lender ICICI Bank had reduced its MCLR by 5 bps from April 1 and its one year MCLR is 8.75%. HDFC Bank had also cut its MCLR by 5-10 bps across various tenures which came into effect on Monday, with one year MCLR now standing at 8.7% compared with 8.75% earlier.

SBI’s interest rate on home loans up to ₹30 lakh would be reduced by 10 bps, the lender said. “Now, the applicable interest rate for such housing loans below ₹30 lakh would range from 8.60% per annum (p.a) to 8.90% p.a.,” SBI said.

Since SBI had also linked its savings bank (SB) interest rates to the repo rate, the SB rates would also be revised, for balances of more than ₹1 lakh, to 3.25% from 3.5% from May 1. SBI had said 95% of the SB account holders had balances of up to ₹1 lakh.

Cash credit, overdraft

Also, with all cash credit and overdraft accounts above ₹1 lakh linked to the repo rate, the benefit of RBI’s rate cut last week, ‘will get passed on in its entirety to such CC/OD customers banking with SBI with effect from May 1, 2019,’ the bank added.