Ahead of monetary policy review, SBI slashes base rate by 15 bps; lower EMIs likely

Minimum balance for savings account raised up to `5,000

By: ENS Economic Bureau | New Delhi | Published: April 4, 2017 1:04 am
SBI Chairman Arundhati Bhattacharya (centre) with B Sriram (left), Managing Director and Rajnish Kumar, MD, National Banking Group on Monday. Ganesh Shirsekar

With the Reserve Bank of India’s monetary policy review just three days away, State Bank of India (SBI) has reduced the Base Rate by 15 basis points to 9.10 per cent, in a move that will lead to lower EMIs for existing borrowers. HDFC Bank has reduced its base rate by 25 bps to 9 per cent, according to a notification on the bank’s website.

SBI has now reduced the Base Rate, or the minimum lending rate below which the bank cannot lend, from 9.25 per cent to 9.10 per cent effective April 1. The cut in Base Rate will lead to lower EMIs for existing borrowers who have taken housing and car loans at the Base Rate. “Majority of loans are still linked to the Base Rate. Old customers who have taken loans linked to Base Rate will benefit to this extent,” said a bank official.

Banks had slashed the marginal cost of funds lending rates (MCLR) sharply in January by as much as 90 basis points as easy liquidity conditions brought down the marginal funding cost. This has now flowed through into the average cost of funds for banks, allowing them to reduce their base rates as well. While loans linked to MCLR are only around 30-40 per cent, the balance is linked to the Base Rate. Other public and private sector banks are expected to slash Base Rate in the coming days.

SBI’s new rate is effective from the date the bank merged five of its associates and Bharatiya Mahila Bank making it the 45th largest bank in the world.

The total customer base of SBI will reach 37 crore with a branch network of around 24,000 and nearly 59,000 ATMs across the country. The merged entity will have a deposit base of more than Rs 26 lakh crore and advances level of Rs 18.50 lakh crore. “Post-merger, all the customers of associate banks will enjoy the benefits of a wide array of digital products and services offered by the State Bank of India,” SBI said.

SBI chairman Arundhati Bhattacharya said 2,800 employees of five associate entities of SBI have so far applied for voluntary retirement scheme (VRS) out of more than 12,000 who are eligible for it. “So far, only 2,800 employees (from associate banks) have opted for VRS. The scheme is open till April 5,” Bhattacharya said.

She said around 12,500 employees of the five associate banks are eligible to opt for VRS. “Whoever comes within the specified scheme and is eligible for it, we have no discretion of keeping them back,” Bhattacharya said.

The employee strength of SBI after the merger has increased to 2,70,011, which includes 69,191 employees from associate banks and BMB.

Meanwhile, SBI has started charging more from its millions of account holders, including those of the 6 lenders merged with it this month, for not maintaining minimum balance as well as for services like cheque books and lockers. These charges will also apply to customers of 5 erstwhile associates and Bharatiya Mahila Bank which have merged with State Bank of India effective April 1.

The monthly average balance (MAB) requirement has been increased to as high as Rs 5,000 for branches in six metros. Savings bank account holders of SBI have to maintain the monthly balance or else they will invite a penalty ranging from Rs 20 (rural branches) to Rs 100 in (metro cities), according to SBI website.

Till March 31, the monthly average balance (MAB) for a savings bank account was Rs 500 without facility of cheque book and Rs 1,000 with cheque book across the country. It has now decided to fix separate MABs for ‘metro’, ‘urban’, ‘semi-urban’ and ‘rural’ areas from the beginning of next financial year. Besides, the bank has increased locker rent and curtailed number of free locker usage in a year. After usage 12 times, the customer has to pay Rs 100 plus service tax applicable for visiting his or her locker. As far as cheque books are concerned, for a current account holder, the first 50 cheques free in a financial year; thereafter, it will cost Rs 3 per leaf.

If a customer maintains Rs 25,000 in his SBI savings account, then the customer can use ATM unlimited number of time. However, the charges of ATM usage over allowed 5 times will attract charges as prescribed by the RBI.

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