SBI Cuts Interest Rates on Home Loans, Fixed Deposits
India’s biggest bank State Bank of India or SBI has cut interest rates on fixed deposits or FDs, its second revision in about 15 days. SBI today lowered FD rates by 20–25 basis points. SBI also announced reduction in its MCLR by 10 bps across all tenors. The new rate of interest will come into effect from 10 September 2019.
State Bank of India (SBI) on 9Sep19 announced a reduction in its marginal cost-based lending rate or MCLR by 10 basis points. It also lowered interest rates on term deposits across all maturities by up to 25 basis points. The move marked the fifth consecutive reduction in MCLR by the country’s largest bank so far this financial year. The cut in interest rates comes on the back of the Reserve Bank of India (RBI)’s 1.1 percentage point reduction in the repo rate — the key interest rate at which it lends short-term funds to commercial banks — so far this year
From September 10, SBI said its one-year MCLR will be 8.15 per cent per annum.
SBI cut interest rates applicable to retail term deposits by 20–25 bps and bulk term deposits by 10–20 bps across tenors, according to a statement.
The lender said that the action was taken to realign its interest rates on term deposits “in view of the falling interest rate scenario”. Due to this rate cut, the MCLR will now come down to 8.15% from 8.25 % from September 10.
SBI interest rates on retail domestic term deposits below Rs. 2 crore
The government and RBI have pushed for better transmission of rate cuts at a time when economic growth in the country has slumped to a six-year low. The central bank has time and again stressed on the need for commercial banks to pass on the benefit of interest rate cuts to consumers.
Last week, the Reserve Bank of India ordered all banks to link certain loans to the external benchmark-based interest rates from October 1, saying banks had not satisfactorily passed on the benefit of recent policy rate cuts to consumers.
Bankers and analysts say the RBI’s move to compel lenders to link all new floating rate retail loans to external benchmarks is unlikely to achieve the intended goal of reducing interest rates sharply for consumers anytime soon.
It is not just SBI that has been cutting interest rates on loans, others too have been reducing rates. These include Central Bank of India, Axis Bank, Oriental Bank of Commerce, IDBI Bank and IDFC First Bank.
This calendar year, RBI has cut the repo rate by a total of 110 bps. However, banks have not cut interest rates with this rigor and this has been a grouse of most borrowers. To tackle this issue of interest rate cut transmission, the central bank has announced that all the loans sanctioned from October 1, 2019 will have to link to an any of the four external benchmark.
On the flip-side however, SBI announced a further cut in fixed deposit interest rates. The bank has slashed the retail FD rates by 20–25 bps across all tenors. For bulk depositors, the FD rates have been cut by 10 to 20 bps across tenors. The new rates will be effective from September 10. This is the third time SBI has cut FD rates in the last two months.
Previously, the bank has cut the FD rates twice in the month of August. With effect from August 26, SBI has slashed the FD rates by 10 to 50 bps lower across tenures for retail customers. With effect from September 10, 2019, the one year FD of SBI will be offered at 6.50 per cent.
Ever since RBI has been cutting key policy rates over the past year, banks along with cutting loan rates have also been reducing interest rates on FDs. This is bad news for those looking at FDs as a route for fixed income.
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