State Bank of India : EMI will be cheaper

by pranjalipargaonkar

New Delhi: SBI has reduced the MCLR reset frequency from 1 year to six months. Loan holders do not have to wait for a year to take advantage of the falling interest rate. Currently, SBI’s one-year MCLR is 7 percent and the six-month MCLR is 6.95 percent. The bank has taken a major decision regarding the MCLR-Marginal Cost of Funds based Lending Rate, the prime rate of loan.

The bank has given this information through its official Twitter handle. The bank tweeted, ‘Enjoy the benefits of a reduction in the interest rate without waiting for a year. SBI has reduced the MCLR reset frequency from 1 year to 6 months’. This will help the borrowers to reap the benefits of reduction in MCLR faster than before when the reset frequency was one year.

Normally, banks offer MCLR linked loans with a reset frequency of one year. This means that the borrowers take more time to get the benefit of the cut in the bank’s MCLR, the benefit of the cut in EMI. This makes it difficult for the borrowers to get the benefit of the reduction in the policy rate announced by the Reserve Bank of India (RBI).

How MCLR Linked Loans Are Cheap – If a home loan is linked to the MCLR based interest rate, the amount of Equated Monthly Installment (EMI) changes only on the reset date of the home loan which comes immediately after the bank revises the MCLR is. For example, if your home loan reset date is in January and the bank has changed its MCLR in July that year, it will have an impact on your EMI only in January next year.

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