ROLLING OUT one of the steepest cuts in borrowing rates in recent times, leading banks lowered their lending rates on Sunday by up to 90 basis points, or a little less than one per cent, a day after Prime Minister Narendra Modi suggested that they should focus on the poor, lower middle class, middle class and senior citizens, and act in “public interest”.
After the deadline for the demonetisation of Rs 500 and Rs 1,000 notes ended Friday, State Bank of India (SBI), the country’s largest bank, reduced the overnight marginal cost of funds based lending rates (MCLR) to 7.75 per cent from 8.65 per cent. The new rates are 8 per cent against 8.90 per cent for one-year loans, 8.10 per cent for two-year loans and 8.15 per cent for three-year maturity, SBI said.
The new loan rates will be effective from January 1. Women home-loan borrowers of SBI will be able to avail loans at interest rates of 8.20 per cent while others can avail of home loans at 8.25 per cent. On November 2, SBI had cut home loan rates to 9.1 per cent — the lowest in six years — as part of a festive scheme.
Delhi-based Punjab National Bank cut the overnight lending rate by 70 basis points to 8.20 per cent while Union Bank of India slashed the rates by 65-90 bps for different tenures. IDBI Bank’s three-year loans will now be at 9.30 per cent, down by 40 basis points. However, borrowers may not get the full benefit of the MCLR cut due to the spread that banks charge on loans.
The steep cut has been facilitated by the surge in deposits during the demonetisation period, which led to a substantial fall in cost of funds for lenders. Banks have mobilised an estimated Rs
14.9 lakh crore of deposits following demonetisation during the last 50 days.
The interest rate cut is expected to boost sentiment, and spending, too, all of which have been hit because of demonetisation.
Other banks are expected to follow suit in the coming days.
Courtesy: Indian Express