It looks like India’s central bank is having its way, at least with the country’s largest bank. Within hours of Reserve Bank of India (RBI) saying that it will ensure that banks will pass on the benefits of interest rate cuts to customers, State Bank of India announced a 15 basis points or 0.15% cut in its own lending rates.
The Reserve Bank of India (RBI) today cut its repo rate or the rate at which it lends to banks —by 35 basis points. This is the fourth time the central bank cut its lending rates this year. Since February, it has effectively cut the rates by 100 basis points, but banks has been absorbing most of this benefit. They have passed on only 29 basis point benefits since February.
Taking a tough stance today, RBI Governor Shaktikanta Das said, “We are willing to take whatever steps necessary to make sure banks transmit the benefits of interest rate cuts to customers.”
And SBI seems to have gotten the cue. “The one year lending rate would come down to 8.25% per annum from 8.40%. This is the fourth consecutive cut in 2019-20,” the bank said. The new rates will be come into effect from August 10, 2019.
After this cut, home loans will become cheaper by 0.35% effective from April 10, 2019. “In addition, SBI is offering a repo-linked home loan product with effect from July 1,” SBI said.
SBI claims to have transmitted RBI’s rate cut benefits ‘fully’. It said that it has passed on the benefit of repo rate reduction by 0.85% during the current financial year to its customers with limits above ₹1 lakh.
With as many as 435 million customers, SBI brings home a fourth of all the deposits made in the country.