Mumbai: With the central bank cutting its repo rate for the fifth time in a row, banks have also begun cutting their lending rates, albeit slowly. On Wednesday, the country’s largest lender, State Bank of India (SBI), announced a cut in the marginal cost of funds-based lending rate (MCLR) by 10 basis points across all tenors, a move that would provide relief to all its existing retail and corporate borrowers.
Similarly, effective this month, private lenders ICICI Bank and HDFC Bank have cut their one-year MCLR by 10 bps to 8.45 per cent and 8.35 per cent, respectively, to cash in on the festive season. Most bank loans are still benchmarked to MCLR.
However, there’s bad news for depositors; their money in fixed deposits and saving account will now fetch them less interest, as banks are also cutting deposit rates in a bid to protect their margins.
SBI cut the interest rate on savings deposits, with a balance of upto Rs 1 lakh, by 25 basis points to 3.25 per cent from November 1, and slashed retail and bulk term deposit interest rates by 10 and 30 basis points, respectively, for one year to less than 2-year tenor from October 10. The interest rate on savings account deposit above Rs 1 lakh has been kept unchanged. SBI’s fixed deposit in the one year to less than two year maturity will now fetch 6.40 per cent compared to the earlier rate of 6.50 per cent.
The bank’s one-year MCLR has come down to 8.05 per cent from 8.15 per cent. The new rates are effective October 10. This is the sixth consecutive cut in MCLR in FY20, said the bank.
This month, the Reserve Bank of India lowered the repo rate by 25 basis point to 5.15 per cent in its fourth bi-monthly monetary policy. This was the fifth cut in a row by the RBI, taking the cumulative repo rate cuts starting February 2019 to 135 basis points. However, banks have been slow in passing on the benefit of the RBI rate cuts.
