The Hindu Business Line : State Bank to offer cheaper loans from New Year

Mumbai, Dec. 20 Come New Year, State Bank of India’s borrowers, both retail and corporate, will have something to cheer about. India’s biggest bank has decided to slash its benchmark prime lending rate (BPLR) by 75 basis points to 12.25 per cent with effect from January 1, 2009.

Depositors, however, will be disappointed as the bank has decided to cut interest rates on deposits by 25-100 basis points across various maturities beginning New Year.

“The cut in BPLR will benefit all floating interest rate loan borrowers. Within the retail segment, home loans, auto loans and personal loans will see a downward revision. Even corporate loans across-the-board will get re-priced,” said a senior official from the bank.

SBI’s BPLR is currently the lowest in the Indian banking sector. BPLR is the benchmark interest rate at which the highest-rated corporate can borrow from the bank.

The bank is likely to take a hit of about 4-5 basis points on its Net Interest Margin, he said. In the quarter ended September, the NIM was at 3.16 per cent.

Deposit rates

The highest interest rate that a depositor can get from SBI from January 1 is 9 per cent on the 1,000 days deposit. This deposit currently earns 10 per cent interest.

SBI has cut interest rate by 25 basis points on deposits in two maturity buckets – two years to less than 1,000 days and 1,001 days to less than three years to 8.75 per cent each.

The bank has cut interest rate by 50 basis points on deposits in three maturity buckets – 15 days to 45 days (4.25 per cent), 91 days to 180 days (6.50 per cent), and five years and up to 10 years (8.50 per cent). In the case of two maturity buckets, the interest rates have been pared by 75 basis points –181 days to less than one year (7.25 per cent) and three years to less than five years (8.50 per cent).

SBI has slashed interest rates by 100 basis points in the case two maturity buckets – one year to less than two years (8.50 per cent) and the 1,000 days deposit (9 per cent).

Other banks

Among other banks that cut lending rates were Union Bank of India, which also cut PLR by 75 basis points to 12.50 per cent with effect from December 8, 2008. The bank also decided to reduce its deposit rates across various maturities by 50 to 150 basis points with effect from January 1, 2009. The maximum interest rate is capped at 8.75 per cent for the term one year and above.

Private sector HDFC Bank, too, announced a two-tranche cut of 25 basis points each in its BPLR to 16 per cent, on December 15 and January 1, 2009.

Earlier this month, the RBI Governor, Dr D. Subbarao, announcing the ‘Growth Stimulus’ package, had said, “We hope that the measures announced today encourage banks to cut lending rates. The financing cost, transaction cost, and administrative cost of passing on this money should be as small as possible.”

Taking the cue from RBI, banks have started cutting lending and deposit rates.

BANKs CUT MSME loans

Canara Bank, Corporation Bank, Allahabad Bank and Syndicate Bank have reduced the rate of interest on loans and advances to Micro, Small and Medium Enterprises.

For micro enterprises, these banks have reduced the interest rate by 100 basis points and for SMEs, by 50 basis points.

Related Stories:
Public sector banks cut rates on new home loans
SBI cuts rates for MSMEs
PSU banks aim for aggressive passenger vehicle loan growth

More Stories on : Interest Rates | Credit Market | Fixed Deposits | State Bank of India

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