In an encouraging development in the country's housing sector, the housing finance companies are all set to slower their home loan rates as major banks have already started reducing rates shortly after the implementation of a new interest rate calculation regime mandated by the RBI. Banks have shifted to a new loan pricing regime whereby the marginal cost of funds-based lending rate (MCLR). Under the MCLR, banks need to consider their marginal cost of funds, or the cost incurred on incremental deposits across different maturities. To this, banks will add to their operating costs, the negative carry on their cash reserve ratio balances with the central bank at a tenure premium. The move was aimed at making transmission of monetary policy more effective. The State Bank of India, the country's largest lender, reduced its home loan rate by five basis points to 9.40%. The revision in the rate follows reduction in the one-year MCLR to 9.15% from 9.20% and that the latest is the second reduction by SBI since the RBI affected a cut in repo rate on April 2, said official sources.
