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SBI begins year with rate cut

Mumbai: The State Bank of India (SBI) on Monday reduced its base rate and benchmark prime lending rates (BPLR) by 30 basis points each - a move that will benefit close to 80 lakh customers who continue to be in the old regime where lending rates were linked to these two benchmarks.

The SBI said it was reducing the base rate to 8.65 per cent for existing customers from 8.95 per cent, while the BPLR has been cut from 13.70 per cent to 13.40 per cent.

The bank, however, did not alter the marginal cost of funds-based lending rate (MCLR), which would have benefited all its borrowers.

The one-year MCLR of the bank stands unchanged at 7.95 per cent.

The new rates will be effective from January 1, 2018, the bank said in a statement.

With effect from April 1, 2017 all loans sanctioned have been priced with reference to the MCLR.

The MCLR includes marginal cost of funds, negative carry because of CRR (costs that banks incur on keeping funds with the RBI as CRR), operating costs and tenure premium (costs arising from loan commitments with longer tenor).

The final lending rate charged to a customer will include a spread to the MCLR.

However, the MCLR regime is set for a change with the Reserve Bank of India proposing that interest rates be linked to an external benchmark rate.

"We had done the rate review in the last week of December, and based on whatever deposits rates we had, our base rate was brought down by 30 basis points to 8.65 per cent now," P.K. Gupta, managing director for retail and digital banking, told reporters in a concall.

Banks review MCLR on a monthly basis, while the base rate revision happens once a quarter.

"The MCLR was reduced earlier also as the gap between the MCLR and the base rate had become quite wide. This move will help in reducing that gap," he added.

He pointed out that the revision will ensure the transmission of reduction in the policy rates in the recent past.

The State Bank of India also announced that it was extending its ongoing waiver on home loan processing fees till the end of March for new customers and others looking to switch their existing loans to the bank.

Shares of the State Bank of India on Monday closed lower by almost a per cent at Rs 307.05 on the Bombay Stock Exchange.

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