Mumbai, Sep 9 (IANS): The State Bank of India (SBI) here on Monday announced reduction in the marginal cost of lending rate (MCLR), the fifth in FY20, for loans across tenors.

The country's largest bank will reduce interest rates by 10 basis points (bps) across tenors with effect from September 10. Now the one-year MCLR will come down to 8.15 per cent from 8.25 per cent.

After the Reserve Bank of India's (RBI) August monetary policy review, this is the second interest rate cut by the SBI. Soon after the August policy review, the SBI had announced a 15bps cut across tenors with effect from August 10.

ON Monday, the SBI joined Central Bank of India, Axis Bank, Oriental Bank of Commerce, IDBI Bank and IDFC First Bank in lowering the interest rates on loans.

In 2019, the RBI has cut the repo rate by a total of 110bps. But both public and private banks have not lowered the interest rates in the proportion, which has been a grievance of most borrowers.

To address the rate cut transmission issue, the RBI announced that all loans sanctioned from October 1, 2019 will have to linked to any of the four external benchmarks.

The SBI has also cut the fixed deposit (FD) rates, third time in the last two months, by 20-25 bps across tenors. For the bulk depositors, the FD rates have been cut by 10-20 bps across tenors and will be effective from September 10.

However, the reduction in the fixed deposit rates by banks may not be a welcome news for those who look at FDs as a route for fixed income, particularly the pensioners who invest in risk-free long-term FDs.