Mumbai, Dec. 29: State Bank of India (SBI) today announced its benchmark prime lending rate at 10.25 per cent, which is 25 basis points lower than its existing prime lending rate (PLR) of 10.5 per cent. The bank is also lowering interest rates on domestic term deposits across long-term maturities by 25 basis points.

SBI said the benchmark rate will be effective from January 1. This is in response to the Reserve Bank of India (RBI) suggesting banks to determine such a rate by taking into account their actual cost of funds, operating expenses and a minimum margin to cover regulatory requirement of provisioning, capital charge and profit margin.

Following the RBI diktat, several banks, including Union Bank of India, Bank of Baroda and Canara Bank, have already announced the benchmark PLRs.

The benchmark PLR will be known as State Bank Advance Rate (SBAR) and all loans currently linked to PLR, SBI Medium Term Lending Rate (SBMTLR), and State Bank Long Term Advance Rate (SBSTAR) will be linked to SBAR with effect from January 1.

SBI added that with this, tenor-linked PLRs will be discontinued. Further, term premia and credit risk premia will be added to SBAR for determining lending rates.

The bank also brought down interest rates by 25 basis points on domestic term deposits with maturity of two years to less than three years and three years and above.

With this, the revised interest rate for deposits of one year to less than three years will be 5 per cent, while for maturities of 3 years and above will be 5.25 per cent.