Mumbai: The State Bank of India on Friday announced to cut down the interest rate by 5 basis points on its home loans up to Rs 30 lakh. The announcement came after the Reserve Bank of India had reduced the repo rate by 25 basis points. RBI announced that the repo rate has been cut to 6.25 per cent during its sixth bi-monthly monetary policy review on Thursday.

Chairman of RBI Rajnish Kumar, said in a statement, “On the back of the monetary policy announced by the RBI, we have taken the lead to cut interest rates on home loans up to Rs 30 lakh.”

The new rates are effective from Friday onwards. Rajnesh Kumar added that RBI has the highest market share in the home loans market and it is appropriate to empower the large lower and middle-class segment by transmitting the rate cut announced by the bank.

Kumar reportedly said the banks deposit rates are much lower than peers and the reduction in deposit rates is necessary to cut the overall lending rates under the Marginal Cost of Funds based Lending Rate ( MCLR) system.

For effecting a rate cut in home loans, the bank will either have to decrease its one-year MCLR or can go for a cut in its spreads over MCLR for the product, he said.

Soon after the RBI’s move, state-run Bank of Maharashtra had also announced a 0.05 per cent cut in its MCLR for sixth-month loan tenor.

In a post-policy conference with reporters, RBI Governor Shaktikanta Das had said he will speak to bankers to ensure a quicker and better transmission of the policy rates in a meeting scheduled to take place in two-three weeks.

Moreover, Kumar added that the external benchmark rate which the RBI seeks to implement by April is unlikely to be implemented as the operative guidelines on the same are yet to be released.

(With PTI inputs)