SBI to cut MCLR by 10 basis points across all tenors from Oct 10

The country’s largest lender, State Bank of India, will cut its MCLR by 10 basis points across all tenors from Thursday.

The one-year marginal cost of funds-based lending rate (MCLR) would come down to 8.05 per cent from 8.15 per cent from October 10. This is the sixth consecutive cut in MCLR in the current financial year (FY20), the SBI said in a statement.

For pricing of retail and SME loans, the bank has already started using external benchmark (repo rate) to fix lending rates from October 01, 2019. Reserve Bank of India reduced its key policy rate (repo rate) by 25 basis points to 5.15 per cent in October's monetary policy review.

Bankers have maintained that while the bank was passing on the cost benefit, the demand for credit is also low.

The Reserve Bank of India's data on credit offtake indicates that outstanding loans of the banking system shrank by about 0.7 per cent by the middle of September, 2019. The year-on-year credit growth was recorded at 10.3 per in mid-September, 2019.

Last month, SBI also realigned its interest rate on term deposits in view of the falling interest rate scenario and surplus liquidity. The bank reduced retail term deposit rates by 20-25 bps and bulk term deposit rates by 10-20 bps across tenors.

Deposits of the banking system have grown 1.2 per cent from start of financial year till mid-September 2019 and 10 per cent year-on-year, RBI data said.