SBI cuts bulk deposit rate; PNB, IDBI and OBC reduce lending rates

IDBI Bank to apply base rate for auto and home loans

A day after the Reserve Bank of India (RBI) cut the marginal standing facility (MSF) rate, State Bank of India (SBI) reduced the rate on bulk deposits by 50 basis points on Tuesday. Also, public sector lender Punjab National Bank (PNB) slashed its lending rates on select loans in the festive season to drive retail credit, while another state-run lender, IDBI Bank, has decided to offer home and automobile loans at base rate. Oriental Bank of Commerce (OBC), too, has decided to cut the interest rate on consumer durable and commercial vehicle loans.

SBI has cut rates on seven to 60 days bulk deposits to 8.5 per cent from Thursday. A senior official said, “Our effective cost of funds, including statutory liquidity ratio and cash reserve ratio on the short-term side, was 9.3 per cent. Now that RBI has cut the MSF rate, why should the bank pay more?”

PNB has cut lending rates on select loans namely car, two-wheeler, housing, personal and consumer durable loans, while IDBI Bank will offer home loans and auto loans at the base rate of 10.25 per cent. PNB and IDBI Bank have also waived processing fees.

OBC has cut rates on consumer durable and commercial vehicles loans by 0.25 per cent. Interest on commercial financing of four-wheelers (auto and taxis) has been reduced to 12 per cent from 12.25 per cent. Personal loans and consumer durable loans have been reduced by 0.25 per cent to 12.50 per cent for government employees. For others it has been brought down to 13.50 per cent.

According to the latest RBI data, retail loans grew almost 18 per cent year-on-year in August.

During festive seasons, these loans typically grow by about 20 per cent.

RBI had cut MSF rate by 50 basis points to 9 per cent on Monday after market hours. This was the second successive cut in less than a month. The Street expects another cut in MSF in the second quarter review of the monetary policy, which is due later this month. The next cut is also expected to further ease liquidity.