ICICI Bank, the country’s largest private sector lender, on Thursday reduced by 5 basis points (bps) the spread over the marginal cost of funds-based lending rate (MCLR) for interest rates on home loans of all tenures up to R75 lakh. The effective floating interest rate on housing loans extended by the bank now stands at 9.15% for women and 9.20% for other salaried borrowers.
Last week, ICICI Bank had announced a 10-bp cut in MCLR across tenures, effective November 1. Subsequent to the cut, the one-year MCLR stands at 8.95%. Larger rival State Bank of India (SBI) has also reduced its one-year MCLR by 15 bps to 8.90%.
However, the spread over MCLR on home loans from SBI remains unchanged at 20 bps for women and 25 bps for other borrowers, with the effective interest rates on home loans up to R75 lakh for the two categories standing at 9.10% and 9.15%, respectively. These rates are applicable only to new borrowers as SBI and ICICI Bank continue to maintain their base rates at 9.30% and 9.35%, respectively.
Subsequent to the Reserve Bank of India’s move to reduce the repo rate by 25 bps to 6.25% in October, banks have taken the opportunity to reduce MCLRs.
The reduction in MCLR has been accompanied by cuts in interest rates on fixed deposits, which is important in order for banks to be able to preserve their margins. The rate on SBI’s one-year fixed deposits has dropped to a six-year low of 7.05% after the latest round of rate cuts effected by the country’s largest bank, which saw the rates on two-year and three-year deposits head to 7% and 6.5%, respectively. The last time SBI offered a lower rate on one-year deposits was between October 1 and December 7, 2010, when it stood at 7%.