Many banks, including country’s largest lender State Bank of India (SBI), have cut their lending rates, following a deluge of deposits after the notes ban. The rate cut by banks come after Prime Minister Narendra Modi on Saturday in his New Year’s eve address to the nation asked banks to “keep the poor, the lower middle class, and the middle class at the focus of their activities,” and to act with the “public interest” in mind.
SBI, the country’s biggest lender by assets, on Sunday cut its lending rates by 90 basis points for maturities ranging from overnight to three-year tenures. After the rate cut, SBI has reduced marginal cost of funds based lending rate (MCLR) to 8 per cent for one-year tenure, from 8.9 per cent.
Banks use the one-year benchmark for home and car loans. They add a margin above their MCLR to price retail loans. This is the lowest benchmark rate for SBI in six years. Under a new lending rate regime effective from April 1 of last year, banks price their lending rates based on marginal cost of lending rate (MCLR), which is closely linked to the actual deposit rates.
