SBI cuts benchmark lending rate by 0.25%
The combined effect of base rate and BPLR cut estimated at Rs 1,300 crore
After cutting its base rate last Tuesday by 25 basis points, country's largest lender State Bank of India, today reduced its benchmark prime lending rate (BPLR) by similar margin. The banks BPLR now stands at 14.5 per cent. BPLR is the erstwhile reference lending rate to which all loans were linked. Borrowers who availed loan before July 2010 and has not converted those loans to the base rate will get impacted due to a change in BPLR.
Regarding impact on the bank's net interest margins, Sunil Pant, chief general manager, SBI, 7 per cent of the total domestic loan book is linked to BPLR. So impact is estimated at about Rs 100 crore, in terms of interest income. The base rated liked portfolio is close to 67 per cent of loans. The combined effect of base rate and BPLR cut estimated at Rs 1,300 crore.
Reserve Bank of India on last Monday while keeping the key interest rates unchanged had cut the cash reserve ratio (CRR) by 25 basis points to 4.5 per cent of the bank’s net time and demand liabilities (NTDL). The banks don’t earn any interest on CRR. This move will be releasing Rs 17,000 crore in the banking system enabling the banks to lend it to the productive sectors. SBI as the biggest lender would gain maximum Rs 2500 crore from this additional liquidity.
The bank had already cut its base rate to 9.75 per cent last week immediately after RBI announced its decision to reduce CRR.
Banks lobby group Indian Banks Association (IBA) is in talks with RBI to invoke sunset clause on BPLR meaning all the borrowers whose rates are linked to BPLR would have to mandatorily shift to the base rate linked rates.
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