State Bank of India (SBI) gave a breather to its customers on Monday by drastically reducing the lending rates by 25-75 basis points (bps). This will have to be correlated by other lenders at a time when edges are under compulsions due to extended moratorium on loans and an announcement due on whether they can indeed charge interest on the moratorium.
The lending rate reduction came into picture after the country’s largest lender informed its interest rates on retail term deposits by up to 40 bps across all tenors, starting from May 27th. Also, the bank reduced its deposit rates twice in May, as it faced a real challenge with managing a great amount of surplus funds, in the non-attendance of robust credit demand. It had revised deposit rates by 20 bps (effective May 12).
However, SBI on Monday passed on the entire 40-bps rate reduce to its retail customers who had opted for loans linked to the external benchmark-linked lending rate (EBR) and repo-linked lending rate (RLLR).
According to the reports, all new and fresh retail loans imparted from October 1 are by default considered under EBR and RLLR, while the bank had given customers the option to shift their home and retail loans, linked to the marginal cost of funds-based lending rate or base rate, to such EBRs.