SBI passes on entire benefit, cuts lending rate by 75 bps

MUMBAI: State Bank of India (SBI) has passed on the entire cut in interest rates by the RBI to its borrowers by bringing down its external benchmark-linked lending rate as well as the repo-linked lending rate by 75 basis points (100 bps = 1 percentage point) from April 1. The bank has also brought down interest rates on deposits by 20-50bps. The interest rate on bulk deposits has been brought down by 100 bps.
The move comes on the back of the RBI making available to banks Rs 3.74 lakh crore through a host of measures. The reduction has brought down interest rates on home loans by up to Rs 30 lakh to 7.95%. SBI said that it would factor in the loan-to-value, whether there is a woman borrower and the risk grade of the borrower before arriving at the final rate.
Typically, other banks follow the SBI in both lending and deposit rate cuts.
While the reduction in rates is positive for borrowers, those depending on fixed deposit will see a sharp drop in their earnings. With uncertainty in the markets resulting in the bank getting more deposits than it can deploy, SBI cut its short-term fixed deposit rates (7-45 days) to 3.5% from 4% earlier. This is the second cut in deposit rates this month with the earlier cut taking place on March 10. The highest return that the bank offers is 5.7% on all deposits over a year. On bulk deposits, the highest return is 3.7%, which in real terms (after adjusting for inflation) is negative.
Earlier this month, SBI reduced its interest rates offering 5.9% at its highest maturity. Incidentally, this is lower than the 6% that Kotak Mahindra Bank is offering on savings deposits of over Rs 1 lakh. Addressing newspersons, SBI chairman Rajnish Kumar said that despite uncertainty, the bank was seeing healthy growth in deposits. “We are not seeing any unusual movement in withdrawals,” he said.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *