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SBI cuts deposit, lending rates

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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 currently at 5.4%.

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.




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Category: Stock Market


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