State Bank of India (SBI), the country’s largest lender, on Monday reduced its base rate and prime lending rates for existing customers by 30 basis points each effective from January 1.
One basis point is a hundredth of a percentage point.
The bank will also extend its on-going waiver on home loan processing fees till March 31 for new customers and for customers switching their loans from other banks to SBI.
Even as all the new customers are offered marginal cost-based lending rate (MCLR), more than half of SBI customers and old home loans are still linked to the base rate and some corporate loans to PLR.
About 8 million customers will be benefited by this move, said P K Gupta, managing director (retail and digital banking) for SBI.
The revised base rate for the bank is now at 8.65 per cent, while the BPLR is now 13.40 per cent. The base rate is the minimum a bank can offer to its customers.
"The reduction in base rate is a New Year gift to the bank's loyal customers as a large number of consumers who have their loan linked to base rate will be benefited by a decrease in rates. This reduction is part of bank's efforts to ensure transmission of reduction in the policy rates in the recent past,” Gupta said in a statement.
The rate cut by SBI is expected to be followed by other banks that are reluctant to pass on the benefit to customers despite policy rate cuts by the Reserve Bank of India. Banks cite the rising bond yields as a reason for not cutting rates. Since MCLR is linked to market rates, it is not easy to tinker with the rates.