INSUBCONTINENT EXCLUSIVE:
Mumbai: State Bank of India has cut its fixed deposit rates for the second time in a fortnight, after pressure from the government and the
RBI to align lending rates to external benchmark like the repo rate.
The country’s largest lender on Monday also reduced its marginal cost
of lending rate (MCLR) by 10 basis points across tenors
Its oneyear MCLR now stands at 8.15%
This is SBI’s fifth consecutive cut in MCLR this fiscal.
“In view of the falling interest rate scenario and surplus liquidity, SBI is
also realigning its interest rate on term deposits with effect from September 10,” the lender said in a statement.
SBI cut its term
deposit rates by 20-25 basis points and bulk TD rates by 10-20 bps across tenors
Now, these FDs will fetch you an interest rate of 5.80%.
State-run banks are under pressure from the government to cut rates to help prop up
the economy, which has slowed to a six-year low
Banks have resisted multiple diktats by the Reserve Bank of India and the government as their deposits tend to reprice at a slower pace,
which affects their ability to transmit
This is evident from the fact that despite 110 bps cut to the repo rate in 2019, banks have been able to cut MCLR and term deposit rates by
just 20-25 bps.
Last week, the RBI made it mandatory for banks to link their retail and MSME loans to external interest rate benchmarks in
its biggest push to make its interest rate decisions effective and suggested a bunch of rates that lenders could choose from.
In an industry
conference last month, RBI governor Shaktikanta Das said the transmission of policy rates at just 29 basis points this year compared to a
combined repo rate cut of 75 bps (excluding the 35bps cut in August) did not meet RBI’s expectations.
Repo rate is now the lowest in a
decade at 5.4%, down from 6.5% in February, while the three-month treasury bill rate has seen a drop of 100 bps since February and it’s
The six-month T-bill rate, which was at 6.4% in February, is now at 5.5%, but banks have been rather slow in passing on the rate cuts.