SBI cuts lending rate by 75 bps as RBI introduces liquidity package

Hours after the Reserve Bank of India (RBI) reduced the repo rate by 75 basis points (bps), the country’s largest lender, State Bank of India (SBI), on Friday said it would pass on the entire cut to its customers, effective April 1.

SBI cut interest rates on retail term deposits by 20-50 bps. For bulk deposits, the cut was steeper, by 50-100 bps, due to huge liquidity in the system.

“Responding to the RBI’s extraordinary monetary policy measures to support the wider economy, the bank passes on the entire 75 bps repo rate cut to its borrowers availing loans linked to the external benchmark-linked lending rate (EBR) as well as the repo-linked lending rate (RLLR),” the bank said in a statement.

The EBR will stand reduced to 7.05 per cent per annum from 7.80 per cent earlier. The RLLR will be 6.65 per cent, down from 7.40 per cent.

Consequently, equated monthly instalments (EMIs) on eligible home loan accounts (linked to EBR/RLLR) get cheaper by around Rs 52 per 1 lakh on a 30-year loan, the bank said.

The lending rates for retail loans and SMEs are linked to the external benchmark, ensuring automatic transmission.

A decision on the marginal cost of funds-based lending rate (MCLR) will be taken when the bank's asset liability committee (ALCO) meets next month. The impact of recent RBI policy measures and reduction in the bank’s deposit rates will be reflected in the next review of MCLR, SBI said.

Other lenders are likely to follow suit, and rate cuts could be between 75 and 100 bps across different types of loans. The revision in loan rates will be effective from April in the case of most banks.

Banks expect deposit rate cuts in the range of 25-50 bps by next week, bank executives said.

With the 75-point cut in the policy repo rate and various liquidity-inducing steps, the actual benefit for banks will be more than 100 bps, said the bank executives.

SBI Chairman Rajnish Kumar said his bank would have Rs 31,000 crore available for deployment into lending and investment operations.

For six public sector banks — Corporation Bank, Andhra Bank, Oriental Bank of Commerce, United Bank of Bank India, Syndicate Bank and Allahabad Bank — which are set to merge, their anchor banks will take a decision on rate revision, a chief executive of PSB said. Punjab National Bank, Union Bank, Indian Bank and Canara Bank are anchor banks.

Syndicate Bank MD and CEO Mrutyunjay Mahapatra said the repo rate-linked products would see transmission as early as April 1. However, the MCLR, which has a deposit cost, cannot be reduced at this point of time "as it will send a wrong signal in the times of economic stress".

CRISIL said the moratorium would benefit both retail and corporate borrowers.

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