A day after Prime Minister Narendra Modi asked banks to priorities lending towards poor and lower middle class, country's largest lender SBI on Sunday cut benchmark interest rate across various maturities by 0.9 per cent, a move expected to be shortly followed by other banks.
The bank has reduced marginal cost of funds based lending rate (MCLR) by 0.9 per cent from 8.90 per cent to 8 per cent for 1-year tenure, State Bank of India (SBI) said in a statement.
According to NDTV, this is the lowest benchmark rate for SBI in six years. Apart from SBI, Punjab National Bank and Union Bank of India have also slashed the benchmark interest rate by upto 0.9%
Yesterday, the Prime Minister asked banks to pay special attention towards poor and middle class.
"While respecting the autonomy of banks, I appeal to them to move beyond their traditional priorities and keep the poor, lower middle class and middle class at the focus of their activities," he had said.
"India is celebrating the centenary of Pandit Deendayal Upadhyay as Garib Kalyan Varsh. Banks should also not let this opportunity slip. They should take appropriate decisions in public interest promptly," he had said.
Flushed with funds due to demonetisation, the new interest rate for other tenures including one month, three months and six months has been reduced by 0.9 per cent.
MCLR has been reduced by 0.9 percentage points to 8.10 per cent for two years and 8.15 per cent for three years.
Last week, its subsidiary State Bank of Travancore had announced reduction in the lending rate and another public lender IDBI too reduced it by up to 0.6 per cent.
Banks have moved to MCLR as their new benchmark lending rate from June, replacing the base rate system for new borrowers. It is calculated on the marginal cost of borrowing and return on net worth for banks. It was introduced by RBI to ensure fair interest rates to borrowers as well as banks.
It also seeks to address the regulator's primary objective of expediting monetary policy transmission along with augmenting uniformity and transparency in the calculation methodology of lending rates. MCLR rates are revised every month.
(With inputs from PTI)
(Feature image source: Reuters)