In a big relief to home and auto loan borrowers, several banks led by market leader SBI today slashed lending rates by up to 0.3 per cent after RBI cut key policy rate.
State Bank of India (SBI) reduced its base rate or minimum lending rate to 9.70 per cent from 9.85 per cent effective June 8. This is the second rate cut by SBI in about two months.
While the Reserve Bank of India (RBI) has cut its lending rates by 75 basis points (0.75 percentage point) in three installments since January, the SBI has done so by 30 bps (0.30 percentage point) in two tranches.
Meanwhile, another state-owned lender Allahabad Bank cut base rate 0.30 per cent while Dena Bank, Punjab & Sind Bank reduced their base rate by and 0.25 per cent each.
The base rate has been be reduced to 9.95 per cent from 10.25 per cent, effective June 8, Allahabad Bank said in a filing to the BSE.
At the same time, Dena Bank and Punjab & Sind Bank lowered their base rate by 0.25 per cent to 10 per cent.
With the reduction, all loans linked to the base rate will come down proportionately.
IDBI Bank, however, has reduced bulk deposit rate, a move which is a precursor to a cut in lending rate.
Other banks are likely to follow suit in the next few days.
As part of its second bi-monthly monetary policy review today, RBI cut the repo rate (short-term lending rate) from 7.5 per cent to 7.25, but left all other policy tools like cash reserve requirement unchanged at 4 per cent and Statutory Liquidity Ratio (SLR) at 21.5 per cent.
RBI Governor Raghuram Rajan today also urged banks to pass through the sequence of rate cuts into lending rates. Despite two repo rate cuts by RBI, very few banks have passed on the benefits to customers.