State Bank of India (SBI) has decided to reduce its marginal cost of funds-based lending rate (MCLR) by 5 basis points (bps) across all tenors. The 1-year MCLR comes down to 7.85 per cent per annum from 7.90 per cent, with effect from February 10. This is the ninth consecutive cut in MCLR in FY20, SBI said in a statement. This will lead to a reduction in home and auto loan rates.
The lender also decided to slash interest rates on term deposits — retail and bulk — by 10-50 basis points (bps) across various tenors, as it is sitting on a pool of surplus funds. The revised rates will come into effect from February 10, 2020.
The bank’s credit grew 6.8 per cent to Rs 23 trillion in the 12 months ended December 2019, driven by retail-personal advances, which clocked growth of 17.49 per cent. SBI Chairman Rajnish Kumar in January had said that the bank had given a guidance of 10-12 per cent growth in advances for FY20. However, it would be difficult to reach the 10 per cent-mark, reflecting weak demand for corporate credit.
Referring to resource position, SBI said in view of surplus liquidity in the system, the bank will realign its interest rate on retail term deposits (below Rs 2 crore) and bulk term deposits (Rs 2 crore and above) from February 10. According to RBI, overall liquidity in the system remained in surplus in December 2019 and January 2020. Deposits were up 9.9 per cent to Rs 31.1 trillion as of December-end. The share of low-cost deposits — current and savings accounts — in total deposits declined 51 basis points to 44.72 per cent in December from 45.23 per cent a year ago.
Average daily net absorption under the liquidity adjustment facility (LAF) amounted to Rs 2.61 trillion in December 2019.
In January, average daily net absorption of surplus liquidity soared to Rs 3.18 trillion. RBI conducted four auctions involving simultaneous purchase of long-term and sale of short-term government securities under open market operations for a notified amount of Rs 10,000 crore each during December 2019 and January 2020.