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The State Bank of India (SBI) on Wednesday announced reduction of its marginal cost-based lending rate (MCLR) by 5-10 bps for shorter tenor loans i.e. up to 3 months.

The new rates will be effective from July 10, 2020, said the largest public sector lender of the country.

SBI said it has cut rates of shorter tenor loans to boost credit off take and revive demand.

“This is the 14th consecutive reduction in the Bank’s MCLR. With this revision, SBI’s MCLR up to 3 months tenor comes down to 6.65 per cent p.a., which is on par with the External Benchmark based Lending Rate (EBLR) of SBI,” the bank said in a statement.

According to the statement, the MCLR rate for 1 year, 2 years, 3 years is 7 per cent per annum, 7.2 per cent per annum, 7.3 per cent per annum, respectively.

SBI’s MCLR continues to be the lowest in the market, the bank said.

In June, the SBI slashed its key lending rates, the MCLR and the external benchmark rate (EBR), by 25 basis points and 40 basis points respectively, across tenors.

MCLR is Marginal Cost of Funds based Lending Rate and is an internal benchmark of the funds largely representing the cost of funds for a bank.

All retail loans including home loans sanctioned by banks between April 1, 2016 and September 30, 2019 are linked to MCLR.

However, banks are allowed to keep a spread over and above the MCLR to determine the home loan rate of interest for the borrower.

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