Cash course

Mumbai, April 23: Home loan borrowers of the State Bank of India (SBI) will be wearing a grumpy look after the country’s largest commercial bank chose to buck the trend in the industry and refrained from cutting its base rate to which all home loans are indexed.

However, the bank reduced interest rates on car loans and credit given to small and medium enterprises (SMEs).

While the base rate is the minimum rate at which banks must lend, home and many other loans are pegged to the benchmark rate. A reduction in the base rate gives relief to home loan borrowers in terms of lower equated monthly instalments (EMIs).

SBI’s base rate will remain at 10 per cent. But it cut the interest rate on car loans by 75 basis points, which will ensure that it offers the cheapest car loans in the industry. Giants such as HDFC Bank provide such loans at an interest rate of 11.50 per cent to 12.25 per cent.

The bank also slashed the rates on loans disbursed to SMEs by 200 basis points.

State-owned and private banks have brought down their base rates in the past week after the RBI slashed the repo rate by an unexpected 50 basis points last Tuesday.

At that time, SBI chairman Pratip Chaudhuri had indicated that the bank would look to bring down the spread that it charged over the base rate, adding that interest rates would be brought down on loans that carry high interest rates.

Though large banks such as ICICI Bank and Punjab National Bank have brought down their benchmark rate by 25 basis points, SBI officials justified its inaction on this front, saying that it has one of the lowest base rates in the industry that translated into attractive interest rates on housing loans as well.

The SBI also announced a reduction in deposit rates by 25 basis points to 100 basis points to protect its margins. Interest rates on fixed deposits with maturity between 7 days and 179 days have been brought down by 75 basis points to 7.25 per cent.

In the case of term deposits with maturity between 181 days and less than 1 year, the new interest rate will stand at 7.50 per cent against the existing 8 per cent. Similarly, fixed deposits between 1 and 3 years’ maturity will earn 0.5 per cent lower return at 9 per cent from the current rate of 9.25 per cent.

UBI move

The United Bank India (UBI) has reduced its base rate and benchmark prime lending rates by 15 basis points and 25 basis points, respectively.

The new base rate of 10.45 per cent (10.60 per cent) and BPLR of 14.60 per cent (14.85 per cent) will come into effect from today.

Meanwhile, Kotak Mahindra Bank revised its base rate downwards by 25 basis points from 10 per cent to 9.75 per cent with effect from April 26.

Deutsche Bank cut its benchmark rate by 50 basis points to 10 per cent with effect from April 24.