Loans have become cheaper as banks reset rates

Q: Loans have become cheaper as banks shifted from the base rate to a marginal cost of funds-based rate.

Vivek Kulkarni,

5th April 2016

Home Loan in Delhi

sbi

home loans

hdfc

mclr

loans

monetary policy review

marginal cost of funds-based rate

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Replies (4)

Yes, RBI repo rates are low thats why bank loan rates are cheaper especially it will help home buyers to build their assets and to avail property with low emi money. Bank will give the benefit of low interest rates to the clients.

Abhishek,

19th April 2020

Comment

Similarly, at SBI, the MCLR will range between 8.95% and 9.35% for loans of various tenors, overnight to 3 yrs. At BoB the range is between 9% and 9.65% and for HDFC Bank it is 8.95-9.35%.

the top 5 lenders in terms of market share are SBI and its subsidiaries (19%), HDFC Group (18%), LIC Housing Finance (9%), ICICI Bank (9%) and Axis Bank (5%) as of June 2015.

Sishir,

5th April 2016

Comment

Hi all,
But, for similar risk, it would be fair to say the general direction is downwards. Since the cost of deposit has fallen, the rates will be lower. There will be a sharper focus by banks on the risk premium from now on.

ajit pandey,

5th April 2016

Comment

While we approach for a home loan from SBI are now expected to be priced at 9.45%, one-year MCLR plus a spread of 25 basis points. Currently, SBI offers home loans at 9.55%, based on the base rate of 9.3% plus a 25 bps spread.

Selina Jaitley, Greater Noida

5th April 2016

Hi Selina,
Bankers are explaining that in the MCLR system the difference in the lowest lending rates of banks narrows. For instance, while the difference in the base rates of SBI and BoB was 35 bps, under the new system this has fallen to 10 bps. The cost of deposits is what determines the MCLR and banks have been lowering their deposit rates for more than a year now.

ajit pandey,

5th April 2016

Right Ajit,
SBI’s deposit rate for a maturity of up to one year is now 7.25%, for BoB it is 7.3% while for HDFC Bank it is 7.5%. The share of low-cost deposits is critical since most banks pay customers just 4% on these. At SBI, current and savings accounts account for 42.7% of its total deposits while for BoB the proportion is 30% and at HDFC Bank it is a high 40%.

Jackie,

5th April 2016

Hi Vivek,
Since there is an adjustment for tenors, the rates could vary from client to client depending on the kind of loan being taken. State Bank of India (SBI), Bank of Baroda and HDFC Bank were first off the block to announce their MCLRs. While the MCLRs for SBI and HDFC Bank is 9.2% for a tenor of one year, at BOB the rate is at 9.3%. While for HDFC and SBI Bank this is a fall of 10 basis points over the base rate, for BOB the fall is a much sharper 35 basis point.

Sishir,

5th April 2016

Comment

Hi Sishir,
With respect to base rate, the MCLR would be somewhat lower reflecting the little fall in the cost of deposit over the last quarter. So to that limit, loans will become cheaper for customers.

Jackie,

5th April 2016