Responding to Home Minister P Chidambaram’s appeal to pass the benefits of Reserve Bank of India (RBI)’s move to existing customers, the State Bank of India on Saturday (December 20) announced another round of cut in interest rates on home and corporate loans along with deposit rates.
According to latest announcement, SBI has reduced the Benchmark Prime Lending Rates (BPLR) – the rate on which banks offered loans to its preferred customers – by 75 basis point (0.75%) from previous 13% to 12.25%. The decline in BPLR will result in falling of interest rate on home, auto and corporate loans even to existing borrowers.
With this, the home debts up to Rs. 30 lakh, for the term between 15 and 25 years, will be available at 9.5%; for loans of Rs 30 lakh to Rs 75 lakh at 10.75% and those above Rs 75 lakh at 11%, while the bank has introduced a least home loan rate for 5-year tenure up to Rs.30 lakh at 9% as against the Indian Bankers Association (IBA)’s announcement of 9.25%.
Similarly, to maintain adequate liquidity to bank’s treasure, India’s largest public sector bank has also slashed the term deposit rate ranging from 25 bps to 100 bps depending upon the tenures.
For deposits of 15 days to 45 days, the new rate will be 4.25% as against previous 4.75%; the deposits for 91 days to 180 days will be 6.50% (previously 7%); for term 181 days to less than a year, it will be 7.25% (reduced from 8%); for tenure of two-year to less than three-year and three-year to less than five-year, the new deposit rates will be 8.75% (from 9%) and 8.50% (from 9.25%) respectively.
While SBI has deducted the maximum 100 basis point in two buckets: the term deposits of 1000-day maturity from 10% to 9% and for period of one year to less than two years, it will be revised from 9.50% to 8.50%.
All the revised rates on loans and deposits will be effective from January 01, 2009. This will be a rejoicing gift of SBI to its borrowers.
Just a day before, on Friday (Dec 19) former Finance Minister P Chidambaram, speaking in Parliament on behalf of Prime Minister Manmohan Singh, who holds the Finance Ministry portfolio, had asked banks to filter down the profits provided by RBI to existing customers.
Earlier, on November 06, 2008 SBI had made similar PLR cut to make parity with RBI’s move. This is the second round of cut made by SBI in just six months, while an official of the bank also indicated that further deduction in rates is possible, if inflation dips sharper and RBI further cuts the lending rates.
This move of SBI will force other banks to slash the interest rate on home loans, while some banks including private sector bank like Housing Development Finance Corporation (HDFC) Limited have already slashed PLR by 50 bps to 14.5%, effective from December 22, 2008.
Union Bank of India (UBI) had also cut PLR by 0.75% to 12.50% effective from December 8, 2008. As a result, the bank has revised the interest rate at 8.75% for the term one year and above, while cut the deposit rates by 0.50% to 1.50% on various maturities effective from New Year January 01, 2009.
Following the cue, several banks including Canara Bank, Corporation Bank, Allahabad Bank and Syndicate Bank have reduced the rate of interest on loans and advances to Micro, Small and Medium Enterprises by 0.50% to 1%. For Micro enterprises, the reduction in corporate loan has been dropped by 1.0% while for Small and Medium industries, it has been reduced by 50 bps.
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