Economy

SBI cuts benchmark lending rate by 0.05 pc across maturities

SBI cuts benchmark lending rate by 0.05 pc across maturities”

State Bank of India on Tuesday slashed its marginal cost of funds based lending rate (MCLR) by 5 basis points on various tenures with effect from November 1, 2017. A 1-year MCLR which was 8 per cent earlier now stands at 7.95 per cent.

Meanwhile, another public sector lender Allahabad Bank also reduced the MCLR rate by 0.15 per cent across all tenor. Flush with deposits after demonetisation of high-value notes a year ago, banks led by SBI had last sharply cut lending rates by 90 basis points under the MCLR system in early January.

Banks led by SBI had last sharply cut lending rates under the MCLR system in early January. Similarly, rates for one year will be 7.95 per cent, 8.05 per cent for two years and 8.1 per cent for three years. The lending rate now stands at 7.95 percent.

The Study Group recommended the T-Bill rate, the certificates of deposit (CD) rate and the Reserve Bank's policy repo rate are better suited than other interest rates to serve the role of an external benchmark.

He does not expect much impact on margins due to retail-term deposit rate cut. So a one-year maturity will now fetch 6.25 per cent interest against 6.50 per cent earlier.

RBI is keen that banks lower lending rates further to accelerate credit growth and private investment in an economy growing at its slowest in more than three years. Bank loans last financial year grew at their slowest pace in more than six decades.

RBI introduced MCLR on April 1, 2016 after finding that the then prevailing base rate had failed to achieve the objectives of easier and faster policy transmission.



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