Getting a floating rate home loan from the State Bank of India (SBI) just got a little more dearer. The country’s largest lender has increased the spread it charges over its external benchmark rate (EBR) by 20 basis points for floating rate home loans for new borrowers with, effect from May 1.
After widening the spread over its repo rate-linked external benchmark rate, which is EBR plus spread, it now stands at 7.40 per cent as against 7.20 per cent on April 1, 2020 (1 basis points/bps = 0.01 per cent).
This comes on the same day that SBI cut its marginal cost-based lending rates (MCLR) by 15 bps across all tenors. According to a press release issued by the bank, "The one year MCLR comes down to 7.25 percent per annum from 7.40 percent p.a. with effect from May 10, 2020. This is the twelfth consecutive reduction in bank’s MCLR. Consequently, EMIs on eligible home loan accounts (linked to MCLR) will get cheaper by approx. Rs 255.00 for a 30 year loan of Rs. 25 lakh."
Gaurav Gupta, Founder and CEO, MyLoanCare said, "The bank has increased the spread to incorporate higher risk margin or expected losses in the market and is a reflection of higher expected credit defaults by borrowers in the market due to COVID-19 situation. So, while MCLR has been reduced in response to lower policy rates, the spread has been widened due to expected rise in credit costs."
Source: SBI website
Apart from altering loan rates, SBI has further lowered interest rates on its fixed deposits (FDs) by 20 bps. These lower rates are applicable for FDs of up to three years and the cut will be effective from May 12, 2020.
Source: SBI website
Even though the bank has cut interest rates on certain FDs, it has also launched an FD product to "safeguard the interests of senior citizens in the current falling rate regime," a press release from the bank stated. The product, SBI Wecare Deposit, is a retail term deposit for senior citizens. This scheme would be in effect up to September 30, 2020.
Special deposit for senior citizens
According to the release, under this new product, an additional 30 bps premium will be payable for senior citizen’s Retail term deposits with “5 Years and above” tenor only. This scheme would be in effect up to September 30, 2020.
Thus under this product, the effective rate of interest for retail TDs of Senior Citizens will be:
After widening the spread over its repo rate-linked external benchmark rate, which is EBR plus spread, it now stands at 7.40 per cent as against 7.20 per cent on April 1, 2020 (1 basis points/bps = 0.01 per cent).
This comes on the same day that SBI cut its marginal cost-based lending rates (MCLR) by 15 bps across all tenors. According to a press release issued by the bank, "The one year MCLR comes down to 7.25 percent per annum from 7.40 percent p.a. with effect from May 10, 2020. This is the twelfth consecutive reduction in bank’s MCLR. Consequently, EMIs on eligible home loan accounts (linked to MCLR) will get cheaper by approx. Rs 255.00 for a 30 year loan of Rs. 25 lakh."
Gaurav Gupta, Founder and CEO, MyLoanCare said, "The bank has increased the spread to incorporate higher risk margin or expected losses in the market and is a reflection of higher expected credit defaults by borrowers in the market due to COVID-19 situation. So, while MCLR has been reduced in response to lower policy rates, the spread has been widened due to expected rise in credit costs."
| Tenor | Existing MCLR (In %) | Revised MCLR (In %) |
| Over night | 7.1 | 6.95 |
| One Month | 7.1 | 6.95 |
| Three Month | 7.15 | 7.00 |
| Six Month | 7.35 | 7.20 |
| One Year | 7.4 | 7.25 |
| Two Years | 7.6 | 7.45 |
| Three Years | 7.7 | 7.55 |
Apart from altering loan rates, SBI has further lowered interest rates on its fixed deposits (FDs) by 20 bps. These lower rates are applicable for FDs of up to three years and the cut will be effective from May 12, 2020.
| Tenors | Existing Rates for Public w.e.f. 28.03.2020 | Revised Rates For Public w.e.f. 12.05.2020 | Existing Rates for Senior Citizens w.e.f. 28.03.2020 | Revised Rates for Senior Citizens w.e.f. 12.05.2020 |
| 7 days to 45 days | 3.5 | 3.3 | 4 | 3.8 |
| 46 days to 179 days | 4.5 | 4.3 | 5 | 4.8 |
| 180 days to 210 days | 5 | 4.8 | 5.5 | 5.3 |
| 211 days to less than 1 year | 5 | 4.8 | 5.5 | 5.3 |
| 1 year to less than 2 year | 5.7 | 5.5 | 6.2 | 6 |
| 2 years to less than 3 years | 5.7 | 5.5 | 6.2 | 6 |
| 3 years to less than 5 years | 5.7 | 5.7 | 6.2 | 6.2 |
| 5 years and up to 10 years | 5.7 | 5.7 | 6.2 | 6.5 |
Even though the bank has cut interest rates on certain FDs, it has also launched an FD product to "safeguard the interests of senior citizens in the current falling rate regime," a press release from the bank stated. The product, SBI Wecare Deposit, is a retail term deposit for senior citizens. This scheme would be in effect up to September 30, 2020.
Special deposit for senior citizens
According to the release, under this new product, an additional 30 bps premium will be payable for senior citizen’s Retail term deposits with “5 Years and above” tenor only. This scheme would be in effect up to September 30, 2020.
Thus under this product, the effective rate of interest for retail TDs of Senior Citizens will be:
- For Retail TD of ‘below 5 years’ tenor: 50 bps higher than the rate applicable for the general public (no change in premium)
- For Retail TD of ‘5 years and above’ tenor (new product): 80 bps higher than the rate applicable for the general public (30 bps extra premium).
( Originally published on May 07, 2020 )
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