The State Bank of India (SBI), on Saturday, cut its short-term prime lending rate (STPLR) of below one year by 50 basis points to 10 per cent. With this, SBI's STPLR will be equal to that of Bank of Baroda's. The STPLR of most of the other banks is in the range of 10.5-11 per cent. The SBI move will also lead other banks to cut their STPLR. The new rates will take effect from tomorrow.
Even though banks are allowed to lend at sub-PLR rates only the AAA corporates could take advantage of this. The rate cut aims at giving lower rate to all corporates across the board. "This is a realignment of rates. We want all the corporates to take the benefit of lower interest rates," said SBI chairman Janaki Ballabh.
"We have also cut the rates on the liability side, as otherwise the lending rates cannot be lowered. The average cost of deposits in SBI is now at around 7.4 per cent. Unless we cut the deposit rates we would not be able to maintain the cost," added Ballabh.
SBI cut its lending rate of up to 180 days, and between 180 days and one year by 50 basis points to 10 per cent and 10.5 per cent respectively. It has also slashed the rate of interest on deposits above one year by 50 basis points. The deposit rates of the bank for one year to less than two years will now be at 8 per cent, while that of two years to less than three years will be at 8.5 per cent. The rate of interest on non-resident, non-repatriable and non-resident (external) deposits have also been reduced by 50 basis points for all maturity periods.
The bank has left its prime lending rate (PLR) and medium-term PLR unchanged at 11.50 per cent and 12 per cent respectively.
