The State Bank of India (SBI) on Monday reduced the external benchmark-based rate (EBR) by 25 basis points to 7.80 per cent from 8.05 per cent, and this would be effective from January. The EMIs (equated monthly installment) on existing home and MSME (micro, small, and medium enterprises) loans will come down, as a result of this decision.
SBI's external benchmark-based rate is finalized at 265 bps plus 5.15 per cent repo rate of Reserve Bank of India (RBI). The bank also charges 10-75 bps premium for pricing the effective interest on home loans.
The RBI's Monetary Policy Committee (MPC) had cut the benchmark lending rate (repo rate) by 25 bps to 5.15 per cent in October. However, after five consecutive rate cuts cumulatively amounting to 135 bps, the RBI kept the interest rates unchanged earlier this month.
RBI Governor Shaktikanta Das had pointed out that against the repo rate cut of 135 bps, retail loans have been reduced only to the extent of 44 bps.