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Journalism of Courage
State Bank of India, the largest commercial bank, has reduced its prime lending rate (PLR) and medium term lending rate (MTLR) by 50 basis points to 11 per cent per annum and 11.5 per cent respectively effective from April 1. The bank has also cut interest rates on deposits by 25 to 75 basis points across various maturities.
The cut in prime lending rates, which it charges blue-chip corporate clients, by SBI is likely to trigger reductions by other banks, many of which take their cue from SBI, analysts said. The short term lending rate for maturities up to 180 days has been withdrawn and instead there would be one short term lending rate for maturities less than one year at 10.5 per cent per annum, it added.
On interest for deposits up to Rs 1 crore, SBI has brought down the rates by 25 basis points for all maturities expect for that of one year to less than two years category, where the cut was 75 basis points.
The reduction was in same proportion in case of deposits of Rs 1 crore and above, it said. The short term deposits of seven and 14 days maturity would now attract an interest rate of 4.5 per cent (earlier 4.75 per cent) and five per cent (5.25 per cent) respectively.
The downward revision was also applicable to fresh deposits by senior citizens and the rate for deposits of maturity of one year to less than two years period would be 7.75 per cent (8.5 per cent). A cut of 25 basis points has been made for the other two maturity slabs, SBI added. The bank said revised interest rates payable on NRE deposits would be the same as applicable to domestic term deposits subject to rules governing the NRE deposits.
A few other banks like Central Bank of India and the Union Bank of India have already announced a 25 to 50 basis point reduction in their lending rates from April 1, but most banks usually wait for SBI to make the first move. Banks lowered rates in response to a 50-basis-point cut in the rate on government administered savings schemes from March 1. These schemes were a major stumbling block for banks seeking to lower deposit rates as their post-tax returns were more than 13 per cent compared with a maximum return of 9 per cent on bank deposits.
Structural rigidity has also made it difficult for banks to lower their prime lending rates despite the central bank reducing the benchmark bank rate in October by 50 basis points to 6.5 per cent — its lowest level in three decades.
