Hours after the Reserve Bank of India announced 75 basis points cut in repo rates, State Bank of India (SBI) passed on the complete rate cut benefits to its borrowers availing loans linked to external benchmark linked lending rate (EBR) and repo linked lending rate (RLLR).
Following a 75 basis points reduction in interest rate, SBI's external benchmark linked lending rate will come down to 7.05 per cent per annum from 7.80 per cent earlier. Similarly, SBI's linked lending rate will reduce to 6.65 per cent per annum from existing 7.40 per cent.
SBI, the country's largest mortgage lender, was the first bank to link its loan products, including home loans, to an external benchmark. The public sector lender had chosen to use the RBI's repo rate as the benchmark for their home loans. Loan interest rates linked to repo rate are called repo linked lending rates (RLLR); SBI calls it external benchmark rate (EBR).
Besides, SBI has also proposed to realign its interest rate structure on deposits from March 28, 2020, after the central bank announced additional liquidity measures in today's monetary policy statement.
The bank has slashed its retail term deposit interest rates by 20 to 50 bps across tenors, while bulk term deposit interest rates by 50 to 100 bps.
The lender said that decision on marginal cost of funds-based lending rate (MCLR) will be taken during the asset-liability committee (ALCO) meeting on April 20. The impact of the RBI monetary stimulus and reduction in the deposit rates will be reflected in the next review of MCLR.
Earlier today, the RBI, in its 7th bi-monthly monetary policy statement, announced a 75 basis points (bps) cut in repo rate along with 90 bps reduction in reverse repo rate to offset the impact of coronavirus pandemic on the economy. The cash reserve ratio (CRR) of all banks has also been reduced by 100 bps to 3 per cent of net demand and time liabilities (NDTL) with effect from fortnight beginning March 28, 2020 for a period of one year.
These policy measures are likely to inject Rs 3.74 lakh crore liquidity in the system and will allow the banks to release money into the economy and help their ability to raise capital, the RBI chief said.
In the policy announcement, the RBI Governor Shaktikanta Das announced that all banks, lending institutions have been given authority to allow a three-month moratorium on all loans to provide relief to customers amid the coronavirus lockdown
SBI Chairman Rajnish Kumar has termed the RBI policy announcement as bold, decisive and compelling, saying that it will address the credit needs of the real economy.
"The large rate cut, the adjustment in capital conservation buffer, the moratorium on repayments and the bazooka of conventional cash reserve ratio (CRR) cut and unconventional liquidity measure of incentivising banks to support capital market - all will help financial markets stabilise, lead to immediate rate transmission and address the credit needs of the real economy," Kumar said.
Commenting on moratorium on bank loans, Kumar said that all equated monthly installments (EMIs) on term loans will automatically be suspended for three months. "Installments will get automatically deferred by 3 months for term loans and customers don't have to apply to banks for it," he said.
He further stated that banks can formulate their own policies on new loans keeping in mind borrowers' repayment capacity.
By Chitranjan Kumar