SBI lowers MCLR by 10 bps across tenures

SBI also reduced its interest rate on term deposits, effective from September 10

SBI also reduced its interest rate on term deposits, effective from September 10

The country’s largest lender, State Bank of India (SBI), on Monday announced to cut its marginal cost of funds-based lending rates (MCLR) by 10 basis points (bps) across tenures, with effect from Tuesday. This is the fifth consecutive MCLR cut by the bank in FY20.

The one-year MCLR — which is considered as the benchmark – would come down from 8.25% to 8.15% per annum, which is the lowest in the industry now. At the starting of FY20, one-year MCLR of the public sector lender was 8.55% per annum, which makes the total transmission of the RBI rate cuts to 40 bps by the bank. The RBI has revised its repo rate by reducing it by 110 bps to 5.40% in last four monetary policies.

MCLRs on the loans of other tenures would also come down by 10 bps. A three-year loan would have a MCLR of 8.35% per annum and a two-year loan would have 8.25%. While loans with shorter tenure like six month, three months and one month would be 8%, 7.85% and 7.80% per annum, repectively.

However, earlier this month, the RBI made it mandatory for banks to link certain categories of loans like personal loans, loans to micro, small and medium enterprises (MSMEs) and home loans with the external benchmark rates from October 01, 2019. The central bank said that banks have not transferred the complete benefits of the rate cuts to their customers.

SBI also reduced its interest rate on term deposits, effective from September 10. The bank cut retail term deposit rates by 20-25 bps and bulk term deposit rates by 10-20 bps across tenures.

The lender attributed the falling interest rate scenario and surplus liquidity for realigning its loan and deposit pricing.

Speaking on the sidelines of an event, SBI chairman Rajnish Kumar said there will be further “softening” in the rates by the bank going forward, and affirmed its commitment to support the economy till there is credit demand. The bank’s moves in the future will also be dependent on the calls which the RBI takes at its next review in October, he said.

For the RBI, the rate call is a function of the movement in inflation, Kumar said, adding it is “under control” at present.

(With inputs from PTI)

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