India’s largest lender State Bank of India (SBI) on Wednesday cut its marginal cost of funds-based lending rate (MCLR) for the sixth consecutive time in FY20 and also cut rates on its savings and term deposit rates, days after the Reserve Bank of India cut rates by 25 basis points to 5.15%.
The one-year MCLR has been reduced to 8.05% from 8.15% with effect from October 10, which is lower than the one-year MCLR for the second-largest public sector bank in the country — Bank of Baroda — which stands at 8.35%.
The cut in rates comes at a time when the Indian banking system is witnessing a slowdown in credit growth. For the fortnight ended August 30, the non-food credit growth fell to a 20-month low of 10.15%.
Further, SBI also cut rates on savings deposits up to Rs 1 lakh to 3.25% from 3.5% with effect from November 1, citing adequate liquidity in the system. In addition, the bank cut interest rates on its retail term deposits and bulk term deposits by 10 bps and 30 bps respectively for ‘1 year to less than 2 years’ tenor with effect from October 10. As on June 30, the public-sector lender’s advances amounted to Rs 19 lakh crore and deposits worth Rs 28 lakh crore.
According to a Care Ratings report, the banking system liquidity has widened with the surplus having almost tripled during the week from September 30 to October 4, making it the 18th consecutive week with a surplus.
The ratings agency estimated the liquidity to have increased from Rs 1.1 lakh crore on September 27 to Rs 2.46 lakh crore on October 4, which has been attributed to higher government spending and lower borrowings.
“In view of the festival season and extending the benefits to customers across all segments, we have reduced our MCLR by 10 bps across all tenors,” the bank said in a statement. The bank has also adopted repo rate as the external benchmark for all floating rate loans for MSMEs, and retail products like housing and auto loans from October 1.
(With inputs from PTI)
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Source: Financial Express