Home, car loans to get cheaper
Punjab National Bank (PNB), too, followed suit after India’s largest public sector bank announced its decision.
“The bank has reduced marginal cost of funds-based lending rate (MCLR) by 0.9% from 8.90% to 8% for one-year tenure,” SBI said.
MCLR is the benchmark lending rate based on which interest rate for loans is fixed.
This is the steepest one-time cut in the SBI benchmark rate in the recent years. The bank has so far reduced the benchmark rate by 2% since January 2015. The reduction comes in the wake of banks flush with deposits post demonetisation.
The SBI is expected to announce revised rates for home and car loans on Monday.
The PNB reduced its one-year MCLR rate by 0.7% to 8.45%, effective Sunday. IDBI and State Bank of Travancore had on Friday reduced their benchmark lending rates by 15 and 30 basis points, respectively. Union Bank of India, too, cut it up to 90 basis points.
Prime Minister Narendra Modi, in his address to the nation on Saturday, had asked banks to utilise the “golden opportunity of historical cash reserves in their chests” and lend to poor and middle class.
“History is witness that the Indian banking system has never received such a large amount of money, in such a short time...I appeal to them to move beyond their traditional priorities, and keep the poor, the lower middle class, and the middle class at the focus of their activities,” the prime minister said on Saturday.
Demand for homes and vehicles came down heavily after discretionary spendings of people suffered due to limits imposed on currency withdrawals from banks post November 8 ban on high denomination notes.
India’s largest car maker Maruti Suzuki’s bookings dropped by 20% in November. The second largest car maker Hyundai too reported a significant fall in bookings.
Auto experts said December sales are expected to be muted.
According to bankers, the cut in lending rates will spur demand for retail and corporate loans and kick start economic activities temporarily halted due to demonetisation.