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.
Base rate 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.
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The bank has also said that it will cut deposit rates further by 25 basis points which will be effective from October 5.
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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.