A day after Prime Minister Narendra Modi asked banks to prioritise lending towards poor and lower middle class, country's largest lender SBI today cut benchmark interest rate across various maturities by 0.9 per cent. Besides SBI, the Union Bank of India and the Punjab National Bank also cut rates
The bank has reduced marginal cost of funds based lending rate (MCLR) by 0.9 per cent from 8.90 per cent to 8 per cent for 1-year tenure, State Bank of India (SBI) said in a statement.
The move by India’s largest bank is one of the steepest cuts in loan rates since the global economic crisis in 2008.
So, home loans up to Rs 75 lakh, earlier available at 9.1 per cent, can now be taken at 8.6 per cent. For others, the rate would be 8.65 per cent, against 9.15 per cent earlier.
On Saturday, the Prime Minister asked banks to pay special attention towards poor and middle class.
"While respecting the autonomy of banks, I appeal to them to move beyond their traditional priorities and keep the poor, lower middle class and middle class at the focus of their activities," he had said.
"India is celebrating the centenary of Pandit Deendayal Upadhyay as Garib Kalyan Varsh. Banks should also not let this opportunity slip. They should take appropriate decisions in public interest promptly," he had said.
Flushed with funds due to demonetisation, the new interest rate for other tenures including one month, three months and six months has been reduced by 0.9 per cent.
MCLR has been reduced by 0.9 percentage points to 8.10 per cent for two years and 8.15 per cent for three years.
Last week, its subsidiary State Bank of Travancore had announced reduction in the lending rate and another public lender IDBI too reduced it by up to 0.6 per cent.
Banks have moved to MCLR as their new benchmark lending rate from June, replacing the base rate system for new borrowers. It is calculated on the marginal cost of borrowing and return on net worth for banks. It was introduced by RBI to ensure fair interest rates to borrowers as well as banks.
It also seeks to address the regulator's primary objective of expediting monetary policy transmission along with augmenting uniformity and transparency in the calculation methodology of lending rates. MCLR rates are revised every month.
Finance Minister Arun Jaitley claimed that the ‘note ban’ was a success and the results were showing now. He said that demonetisation had increased the “lending capacity of the banks and naturally the cost of capital will come down”.
However, the Opposition is far from impressed by the ‘demonetisation’ drive with West Bengal CM Mamata Banerjee asking the Prime Minister to give out the details of “black money uncovered from demonetisation”.
Meanwhile, the Congress said that the PM Modi should apologise as the move resulted only in pain for ordinary citizens and most of the black money stored in cash are now part of the system.
"The data is not being given as all the black money in cash is now in banks. Either in benami accounts or some other method," said senior Congress leader Prithviraj Chavan.
Demanding an apology, Mr Chavan said, "The 50 days of so called Suddhi Yagna is now nothing short of uncontrolled forest fire which has taken a toll over 118 lives across the country and crippled 40 per cent of the informal economy".