State Bank of India, the nation's top lender by assets, on Thursday (31 March) set lending rates under new rules that are aimed at improving transmission of policy rate cuts and also making bank loans more competitive.
Bankers have said they do not expect any significant impact on margins from the new lending rate structure, which is based on marginal cost of funds. All local currency loans effective April 1 are required to be priced based on the new rules.
Currently, most banks decide lending rates based on average cost of funds.
SBI will charge an annual interest of 9.2 per cent for loans of one-year tenor, 9.3 per cent for two-year tenor, and 9.35 per cent for three-year tenor.
That compares with the 9.3 per cent base lending rate of the bank. Loans of overnight and one-month tenor will have interest rate of 8.95 per cent and 9.05 per cent, respectively, the bank said in a document posted on its website on Thursday.
Ratings agency India Ratings and Research said in a note it expected as much as Rs 1.2 trillion ($18 billion) worth of corporate borrowing to flow back to the banking sector from the commercial paper market as rates become competitive with the implementation of the marginal cost of funds-based lending rate.
(Reuters)
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