State Bank of India on Wednesday slashed lending rates on car and home loans by up to 0.5 percent, a day after one percent cut in SLR by the Reserve Bank.
SBI has reduced interest rate on home loans of up to Rs 30 lakh to 10.25 percent from existing 10.50 percent (after 0.25 percent concession over the card rate), a senior bank official said.
On the home loans of beyond Rs 30 lakh but less than Rs 75 lakh, the new rate will be 10.40 percent against the existing 10.75 percent, down 0.35 percent.
The new rates will be effective from August 7, the official added.
The base rate or minimum lending rate of SBI stands at 10 percent. Base rate is the benchmark rate below which a bank cannot lend.
With regard to the car loan, the reduction is to the extent of 0.5 percent.
The new car loan would be 10.75 percent against the existing rate of 11.25 percent for a seven-year loan.
Now for every Rs 1 lakh, a customer has to pay Rs 1,699 EMI against Rs 1,725 per month earlier. SBI claimed this as the lowest EMI. With the reduction, a borrower would end up saving Rs 312 per year on every one lakh.
On Tuesday, RBI in its quarterly monetary policy review reduced Statutory Liquidity Ratio (SLR), the amount of deposits that have to be invested in government bonds and other liquid assets, by 1 percent.
RBI Governor D Subbarao cut the SLR to 23 percent, thereby releasing around Rs 68,000 crore of additional liquidity into the system, even as he left all the key interest rates unchanged in the anti-inflationary stance.
Soon after the policy review yesterday, SBI had hinted at lowering lending rates to retail customers.
“The one percentage point reduction in the SLR will release an additional Rs 10,000 crore for SBI. That coupled with Rs 6,500 crore released through the reduction in export refinance, may lead the bank to cut lending rates in retail,” Chairman Pratip Chaudhuri had said.
It is always better to deploy money at 10.50 percent return than the average of 7.5 percent which the SLR gives, Chaudhuri had said.