SBI Alert! New rules to come into effect from May 1, things you must know

New Delhi, Apr 29: In a first-of-its-kind initiative, the nation's largest lender State Bank will be linking its loan and deposit rates to Reserve Bank of India (RBI's) repo rate. The new rule is expected to make the loans cheaper.

The bank will be linking its loan and deposit interest rates to RBI's repo rate from May 1.

Here are the key things to know about new SBI rules if you are a customer:

Repo rate- interest rate linkage

All banks usually finalise their loan interest rates on the basis of MCLR (Marginal Cost of fund base Lending Rate). Most of the times, banks do not pass the changes in repo rate directly to consumers. However, in case, if the banks link the repo rate to loan interest, then the EMIs will come down whenever a Repo rate cut is announced by the RBI. SBI has done this.

Also, SBI customers should note that the new repo rate-loan interest rate linkage process will be applicable only to loans above Rs 1 lakh.

Savings accounts deposits above Rs. 1 lakh to earn low interest

The bank has decided to exempt savings bank account holders with balances up to Rs 1 lakh and borrowers with cash credit or overdraft limits up to Rs 1 lakh from linkage to the repo rate.

From 1 May, according to State Bank's new rules, savings bank account holders are, however, going to earn lesser interests on their deposits above Rs. 1 lakh.

SBI to reduce home loan interest rates

The bank reduced its interest rate by 10 basis points or 0.10 per cent on home loans of up to Rs 30 lakh, earlier this month. The bank also reduced the MCLR by 5 basis points (0.05 per cent) across all tenors. The move will ensure that a change in repo rate by RBI is quickly reflected in deposit as well as in lending rates of SBI.