The country’s largest lender, State Bank of India (SBI), has cut its key lending rate MCLR by 10 basis points (bps) across all tenors from Tuesday. It also reduced the interest rate on term deposits.
The one-year marginal cost of funds-based lending rate (MCLR) would come down to 8.15 per cent from 8.25 per cent from September 10. This is the fifth consecutive cut in MCLR in the current financial year (FY 2019-20), the SBI said in a statement.
A senior SBI executive said while the bank was passing on the cost benefit, the demand for credit is also low. There could be another round of reduction in the lending rate. The RBI’s data on year-to-date credit offtake indicates that outstanding loans of the Indian banking system have shrunk by about 0.9 per cent till the middle of August 2019 over the end of March 2019. The year-on-year credit growth was 11.6 per cent.
“We are expecting a pickup in credit demand during the busy season, which kicks off from October,” he said.
In view of the falling interest rate scenario and surplus liquidity, the SBI is also realigning its interest rate on term deposits, the bank said. The bank reduced retail term deposit rates by 20-25 bps and bulk term deposit rates by 10-20 bps across tenors.
The bank is sitting on surplus funds in excess of Rs 50,000 crore, creating a challenge to deploy resources in a gainful manner, official said. Deposits of the banking system have grown 0.7 per cent from start of financial year till middle of August 2019 and 10.2 per cent year-on-year, RBI data said.