There is Good news for SBI home loan holders. The bank has reduced the MCLR (Marginal Cost of Lending Rate) reset frequency of the loan from one year to six months. This will help the borrowers to take advantage of the reduction in MCLR faster than before when the reset frequency was one year. The bank has given this information through its official Twitter handle.
The bank said in its tweet that the benefits of interest reduction should be availed without waiting for a year. SBI has reduced the MCLR reset frequency from 1 year to six months. SBI Home Loan holders do not have to wait for a year to take advantage of the falling interest rate.
How do MCLR linked loans work?
If a home loan is linked to an MCLR based interest rate, the amount of the Equated Monthly Installment (EMI) changes only on the reset date of the home loan that comes immediately after the bank revises the MCLR. 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.
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. 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).
A borrower must remember that in comparison, it is mandatory to review the external benchmark linked loan and it is reset every three months.
Currently, SBI’s one-year MCLR is 7 percent and the six-month MCLR is 6.95 percent.