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SBI cuts lending rate by 10 bps to 7.90 per cent

SBI cuts lending rate by 10 bps to 7.90 per cent
NEW DELHI/MUMBAI, DEC 9 (AGENCIES) | Publish Date: 12/9/2019 12:45:46 PM IST

The State Bank of India (SBI) on Monday announced a 10 basis points cut in one-year marginal cost of funds-based lending rate (MCLR), effective from December 10. It will bring SBI’s one-year MCLR down to 7.90 per cent from 8 per cent.

This is the eighth consecutive cut in MCLR in the current financial year (2019-2020). Last month it had reduced MCLR by five basis points. The bank claimed it continued to be the cheapest loan provider in the country. The lending rate has been pared to pass on the benefit of its reduced cost of funds to customers, the bank added.

The Reserve Bank of India (RBI) earlier this month kept the repo rate at 5.15 per cent, barely 40bps higher from the lowest ever. On a cumulative basis, the RBI has slashed lending rates by 135bps since the start of the year.

Monetary transmission, the RBI at its December policy review meeting, said had been full and reasonably swift across various money market segments and the private corporate bond market.

“As against the cumulative reduction in the policy repo rate by 135bps in February-October, transmission to various money and corporate debt market segments ranged from 137bps (overnight call money market) to 218bps (3-month CPs of non-banking finance companies),” RBI said. The central bank had also said after the introduction of the external benchmark system, most banks had linked their lending rates to the RBI policy repo rate.

RBI in its monetary policy review last week said monetary transmission (of 135 basis points) has been full and reasonably swift across various money market segments and the private corporate bond market.

Credit market transmission for loans disbursed by banks remains delayed but is picking up. The one-year median MCLR has declined by 49 basis points, RBI added.

The transmission is expected to improve going forward, as the share of base rate loans, interest rates on which have remained sticky, declines; and MCLR-based floating rate loans, which typically have annual resets, become due for renewal, RBI said.

After the introduction of the external benchmark system, most banks have linked their lending rates to the policy repo rate of the Reserve Bank.

SBI has not changed the interest rate on term deposits for now. In November 2019 it had reduced deposit rates by 15 and 75 basis points on account of adequate liquidity in the system.

Overall liquidity in the system remained in surplus in October and November 2019. This was despite an expansion of currency in circulation due to festival demand. Average daily net absorption under the Liquidity Adjustment Facility (LAF) amounted to Rs1,98,566 crore in October, RBI said in policy.

 

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