Special Correspondent

Many others follow suit

NEW DELHI/MUMBAI: In a quick response to the cut in its key rates by the Reserve Bank of India (RBI) to inject additional liquidity, the country’s largest lender, the State Bank of India (SBI), on Thursday announced a reduction in both its lending and deposit rates to make cheaper funds available to borrowers.

Interacting with newspersons in Mumbai, SBI Chairman O.P. Bhatt said the state-owned bank decided to slash its prime lending rate (PLR) by 75 basis points from 13.75 per cent with effect from November 10.

Alongside, the interest rates on fixed term deposits across all maturities, for periods from 91 days and up to five years, will stand reduced by 50 basis points while for those above five years, the cut in rate will be 25 basis points. The reduced rate of interest on deposits will come into effect from December 1 this year.

Following the meeting of public sector bank chiefs with Finance Minister P. Chidambaram early this week, Punjab National Bank, Corporation Bank, Union Bank, UCO Bank and Syndicate Bank have already effected cuts in their lending rates.

In keeping with SBI’s decision, Oriental Bank of Commerce (OBC) and Indian Overseas Bank (IOB) also reduced their PLRs by 75 basis points to 13.25 per cent with immediate effect. While the deposit rates have been left untouched as of now, OBC has also cut its lending rates on housing loans (up to Rs. 30 lakh), and education loans. Private and foreign banks are also in the process of scaling down their interest rates in the coming days.

With the RBI reducing its cash reserve ratio (CRR) and short-term lending (repo) rate along with the statutory liquidity ratio (SLR) in recent weeks to infuse over Rs. 2,60,000 crore to pre-empt an economic slowdown in the wake of the global financial crisis, it also signalled a rate cut by the lender banks. For, the government stressed that apart from adequate liquidity, funds should be provided at cheaper rates.

While borrowers stand to gain, those dependent on bank savings will be hit by the cut in deposit rate.

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