The State Bank of India has reduced the interest rates on lending by 5 basis points, reducing it down to 7.95% from 8%. What will you benefit from this decision?
Sign of Relief for Loan Borrowers
The SBI has reduced the interest rates on lending by 5 basis points. It will work as a relief for loan borrowers. Though the relief is less but still significant. This is the first time in 10 months that the SBI has reduced interest rates for lending. This comes first time under the chairmanship of Rajnish Kumar who has taken the post of chairman last month. The reduced rate will benefit new borrowers but it may not be the case with old borrowers. Old borrowers borrow money on a fixed rate for certain amount of time and only after the lock-in period gets over, they can expect reduction in rates.
After RBI reduced repo rate in its last session, it was expected that the rates will come down from the bank’s side but it took a lot of time. It comes few days after the Government announced a 2.1 lakh crore package for the banks to clear up bad loans.
What will the new Customers Get?
The 5 basis point reduction will benefit new borrowers from November 01. The old borrowers will have to wait till the end of lock-in period. The banks will now peg MCLR at 7.70% for overnight borrowing while 8.10% for three years. The bank will now charge 8.3% interest of loan below 30 lakhs from salaried woman and 8.4% for amount between 30-75 lakhs. For non-salaried women, the interest levied will be 8.4% below 30 lakhs and 8.5% between 30-75 lakhs.
The reduction is rate is coming when at a crucial time when RBI has constituted a committee to revise the formula for pricing the loan. It is also expected that other banks including ICICI, HDFC and UBI may reduce the interest rates to boost MSME businesses already in tough situation. Experts opine that lending interest rates must be down in order to provide relief to borrowers suffering due to high interest rates.