India's largest lender, State Bank of India has cut base rate
by 40 basis points to 9.3%, making it lowest in the country.
is the benchmark rate to which all other lending rates are linked. With this, equated monthly installments on home loans, car loans etc will come down.
The bank has also said that it will cut deposit rates
further by 25 basis points which will be effective from October 5.
This comes after Reserve Bank of India (RBI) cut its repo rate
by 50 basis points to 6.75%. Repo rate
is the rate at which banks
borrow from the RBI.
In this calendar year, RBI has reduced repo rate
by 125 basis points but banks, on an average, have reduced the base rate
by only 25-30 basis points.
Bankers had earlier said that the increase in bad loans has been putting pressure on the margins as increasingly the interest-earning assets are slipping into the non-performing class. This in turn has deterred banks
from cutting loan rates.
However, with the 50 bps rate cut now more banks
are expected to reduce their base rate.