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SBI rules out the case for immediate cut in lending rates

07 May 2013 Evaluate

Country’s largest lender, State Bank of India (SBI) has ruled out any immediate cut in lending rates even as the Reserve Bank of India (RBI) has reduced policy rates by 25 basis points, for the third time this year. The bank cited no Cash Reserve Ratio (CRR) cut, a tool primarily used to infuse liquidity, as the reason for holding back rates.

Drawing comfort from 3-year low inflation, RBI, in its ‘Monetary Policy Statement 2013-14’, reduced repo rate by 25 basis points from 7.5% to 7.25% with immediate effect, its lowest since May 2011, in order to prod the sputtering economy. Consequently, the reverse repo rate under the LAF, determined with a spread of 100 basis points below the repo rate, now stands adjusted to 6.25% with immediate effect.

SBI last reduced its lending rate in January by cutting it by 0.05%. Following the marginal reduction, SBI’s base rate, or the minimum rate of lending, came down to 9.70% from 9.75%.

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