Mumbai: Flush with higher deposits following demonetisation, the country’s largest lender State Bank of India (SBI) on Sunday slashed its benchmark lending rate by 0.9% across various maturities, effective from Jan 1.
The bank has reduced the marginal cost of funds based lending rate (MCLR) from 8.90 % to 8% for 1-year tenure, SBI said in a statement.
The MCLR on overnight borrowings has been reduced to 7.75% from 8.65%, while the lending rate for three-year tenure has been cut from 9.05% to 8.15%.
Similarly, the bank reduced the lending rate by a similar percentage point for tenures including one month, three months, six months and two years.
“With this, the bank has reduced its benchmark rate by 2% from January 2017,” it said.
Banks have moved to MCLR as their new benchmark lending rate from June, replacing the base rate system for new borrowers.
It is calculated on the marginal cost of borrowing and return on net worth for banks. It was introduced by RBI to ensure fair interest rates to borrowers as well as banks.
Last week SBI’s subsidiary State Bank of Travancore also cut rates by upto 0.3%, while IDBI Bank cut its lending rate by upto 0.6% across various loan tenors.
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