The bank has also lowered its lending rates by a nominal five basis points across all tenors.
In a statement, the SBI said the new one-year marginal cost of funds-based lending rate is down to 8.50 per cent now from 8.55 per cent. This is the first reduction by SBI in over 17 months.
Accordingly, the interest rate on housing loans of such size will now be in the range of 8.6 to 8.9 per cent.
The reduction in lending rate by the bank follows a 50 basis point cut in repo rate by the RBI in the course of two monetary policy reviews held in February and April this year.