 "SBI chairman Arundhati Bhattacharya at inaugural session of INFOCOM 2015 in Kolkata on Thursday, December 3, 2015 PTI")
State Bank of India, nation's top lender by assets, on Thursday set lending rates under new rules that are aimed at improving transmission of policy rate cuts and also making bank loans more competitive.
Bankers have said they do not expect any significant impact on margins from the new lending rate structure, which is based on marginal cost of funds. All local currency loans effective April 1 are required to be priced based on the new rules.
Currently, most banks decide lending rates based on average cost of funds.
SBI will charge an annual interest of 9.2% for loans of one-year tenor, 9.3% for two-year tenor, and 9.35% for three-year tenor.
That compares with the 9.3% base lending rate of the bank. Loans of overnight and one-month tenor will have interest rate of 8.95% and 9.05%, respectively, the bank said in a document posted on its website on Thursday.
Ratings agency India Ratings and Research said in a note it expected as much as 1.2 trillion rupees ($18 billion) worth of corporate borrowing to flow back to the banking sector from the commercial paper market as rates become competitive with the implementation of the marginal cost of funds-based lending rate.
