State Bank of India, the country's largest lender, is the second bank to announce a 0.15 percent cut in lending rates following a new system of computation. This means there could be an additional fall in borrowing costs before the buying season.
Private sector bank ICICI Bank was the first one to announce a trim of 0.10 percent in its marginal costs of funds based lending rate (MCLR), Press Trust of India reported. According to the new figures, the lending rate for SBI home loans is 8.90 percent and the new rates will be effective from November 1.
The announcement comes after regulators expressed displeasure as the benefits of rate cuts were not passed on to the borrowers. The cut comes ahead of a busy season during the second half of the financial year when there is an increase in demand for loans. The MCLR was introduced in April this year by the Reserve Bank of India (RBI) after the banks refused to pass over benefits of the rate cuts to the borrowers.
The revised rate structure stands as:
|One year MCLR||8.95%|
|One month MCLR||8.75%|
|Three month MCLR||8.85%|
|Six month MCLR||8.90%|
The banks have been told to follow a set formula for deriving the MCLR based on costs of funds and are required to review the costs on a monthly basis.
"I agree that the transmission through bank lending has been less than anyone of us would have like to. We are hoping that over the next quarter or two, keeping in mind the government has also reduced the small saving rates, the MCLR itself will now throw up more transmission," Urjit Patel told the media.
Since the beginning of the year, the RBI has reduced repo rate by 175 basis points, including the recent cut.
Two weeks ago, the State Bank of India (SBI), along with its subsidiary banks, blocked 6.52 lakh debit cards of its customers following a suspicious malware-related security breach in the ATM network. Later the bank said it would replace all the debit cards.