By Hariprasad Radhakrishnan
State Bank of India (SBI) on Tuesday trimmed the marginal cost of funds-based lending rate (MCLR) by 35 basis points (bps) across tenors. The lender, however, simultaneously cut deposit rates moving to protect its margins; the savings deposit rate was lowered by 25 bps to 2.75% and will save the lender an estimated Rs 2,800 crore. The bank has found itself with around Rs 31,000 crore of extra liquidity after the recent cut in the CRR.
While banks have been pruning their lending rates, for more than a year now, this has not resulted in any uptick in credit off-take as both companies and individuals lie low. Non-food credit growth for the fortnight ended March 13 stood at 6.07% year-on-year, the lowest since May 2017.Given the economy was already slowing and that the shutdown on account of the pandemic will further stymie business, it is unlikely demand for credit will pick up. SBI’s one–year MCLR will now be 7.4% and all borrowings linked to this rate will become cheaper.