 "SBI to use repo rate as benchmark to price MSME, retail loans from Oct 1")
State Bank of India (SBI) will use repo rate as the external benchmark to price all new floating rate loans for Micro and small and medium enterprises (MSMEs), housing and retail loans and medium-size enterprises from October 1, 2019.
This decision follows the Reserve Bank of India notification to link all new floating rate, personal or retail loans (housing, auto, etc.) and floating rate loans to Micro and Small Enterprises, to external benchmarks.
Country’s largest lender said it will voluntarily extend benchmark-based lending to medium enterprises also to boost lending to the MSME sector as a whole.
SBI had introduced floating rate home loans effective July 1, 2019. A few modifications have been made in the scheme effective 1st October 2019 to comply with the latest regulatory guidelines.
RBI’s Internal Study Group (ISG) had examined various aspects of the marginal cost of funds-based lending rate (MCLR) system.
ISG, in a report in October 2017, had observed that internal benchmarks such as the base rate/MCLR have not delivered effective transmission of monetary policy. The Study Group had, therefore, recommended a switchover to an external benchmark in a time-bound manner.
SBI had introduced floating rate home loans effective July 1, 2019. A few modifications have been made in the scheme effective 1st October 2019 to comply with the latest regulatory guidelines.
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