Mayur Shetty, TNN | Sep 29, 2015, 03.49PM IST | Times of India
MUMBAI: The country’s largest lender State Bank of India has been the first off the block to lower interest rates with a 40 basis point cut in its base rate to 9.3%. The reduction follows a 50 basis point reduction in the repo rate by Reserve Bank of India on Tuesday.
The rate cut, which is effective October 5, will put pressure on other home loan providers such as HDFC and ICICI. With this rate cut the gap between SBI and it’s rivals has widened. SBI currently extends home loans at 9.7% for women and 9.75% for others. It’s nearest rivals offer loans at 9.85% and 9.9%.
From October 5, the home loan rates will fall to 9.3% and 9.35%.
Unlike most other lenders who extend car loans at fixed rate, the SBI’s auto loans are linked to its base rate. This means that interest for existing borrowers will come down as well.
According to sources, both HDFC and ICICI Bank will announce new rates before the end of the week.
After lowering the interest rate by 50 basis points to boost economy, Reserve Bank governor Raghuram Rajan said the RBI will work with the government to ensure a faster transmission and also hoped that banks will pass on the benefits to customers.
“We believe that some (monetary policy transmission) would take place very soon and more will take place over time,” Rajan said during the customary post policy meeting with the reporters.
Rajan said markets have transmitted the RBI’s past policy actions via commercial paper and corporate bonds, but banks have done so only to a limited extent.