State Bank of India, the country's largest lender, has cut its marginal cost of lending rate (MCLR) by 5 basis points, which will reduce interest rates on loans. SBI has reduced the MCLR to 8 percent from 8.05 percent, effective from November 10.

Prashant Kumar, deputy managing director and chief financial officer, "This is a fallout of reduction in rates of interest on deposit which we have done last month."

“MCLR is formula based so no impact on the margins and we have also decided to cut rate on deposits; bulk deposits on a wide margin and retail term deposit by 15 bps for 1 year to 2 years. So next month also there would be an impact on MCLR because of reduction in the deposit rates but it would not have any adverse impact on our margins,” he added.

Talking from an industry perspective, Kumar said, “Everybody is having surplus liquidity and anybody decides to take a call on reducing the rate of interest on deposit then MCLR would be automatically reduced.”

When asked whether there will be mark-to-market implication, he said, “I do not think so because we also need to see what happens in the December RBI policy.”