SBI said the change will impact floating rate loans for small businesses, home and retail loans.
State Bank of India (SBI) said on Monday that it would adopt the repo rate as external benchmark for all its floating rate-based loans from October 1. The move by the country’s largest bank comes within three weeks of the Reserve Bank of India (RBI) directed banks to link floating rate-based loans with external benchmark rates, in a bid to enable a faster transmission of reduction in key interest rates to borrowers. In a statement on Monday, SBI said the change will impact floating rate loans for small businesses, home and retail loans.
In its September 4 circular, the RBI gave the commercial banks of external rates for linking their floating rate loans: the repo rate, the three-month or six-month treasury bills, or any benchmark market interest rate published by the Financial Benchmarks India.
The RBI has time and again urged banks to transmit the benefit of lower interest rates to the consumer. “It has been observed that due to various reasons, the transmission of policy rate changes to the lending rate of banks under the current MCLR (marginal cost-based lending rate) framework has not been satisfactory,” the Reserve Bank of India said in the circular.
State Bank of India (SBI) also said it voluntarily extended the external benchmark-based lending to medium enterprises, in order to boost lending to the MSME (Ministry of Micro, Small and Medium Enterprises) sector.
The bank – which had introduced floating rate-based home loans from July 1, 2019 – said it has made some modifications in the scheme effective October 1, 2019, to comply with the latest regulatory guidelines.
SBI said it would make more details available on its website.
Source : NDTV