State Bank of India (SBI) has been making pro-active moves in the Indian banking and financial services sector over the last few months. SBI has previously reduced interest rates on home loans to their lowest possible threshold while ushering in home loan products linked to the benchmark or repo rate of the Reserve Bank of India (RBI). The country’s largest bank has now done it again!
SBI has officially lowered both its deposit and lending rates with effect from the 10th of March, 2020. The MCLR or marginal cost of fund based lending rate has been slashed by 10-15 basis points across diverse tenures. The bank has stated that customers will get this benefit across segments owing to the upcoming festival period in April. The lender has also slashed its interest rate for savings bank accounts to 3% while waiving the monthly average balance requirement which should be good news for a large section of customers.
Key things that you should know
The 1-year MCLR interest rate is thus applicable at 7.75% now as compared to 7.85% previously. This is the 10th MCLR cut in succession for FY2019-20 as per reports. Retail term deposits have seen a reduction by 10 basis points for tenures of 1 year and above. EMIs for home loan accounts (eligible ones which are linked to MCLR) will reduce by approximately Rs. 7.00 for every Rs. 1 lakh on a loan of 30 years according to the bank. SBI has also stated that EMIs for car loans will reduce by approximately Rs. 5 for every Rs. 1 lakh on loans of 7 years.
SBI has lowered FD (fixed deposit) rates by 10-50 basis points, citing reasons such as ample liquidity within the system. The biggest bank in the country has stated that rates of interest were lowered in relation to retail term deposits or fixed deposits by 10 basis points in case of maturities of a year and beyond. These were reduced by 50 basis points for deposits up to 45 days. Bulk rates for FDs have also come down by 15 basis points for deposits with tenures going up to 180 days and above. The RBI has already kept the key policy rate unchanged in its last MPC review and there are ample possibilities for further rate cuts and easing of the monetary policy. This will be an outcome of the mission of the apex bank to boost economic growth while avoiding further inflation.
Yes Bank becomes a new associate entity of SBI
State Bank of India has previously merged 5 associate banks within its own structure in the year 2017, namely State Bank of Mysore, State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Hyderabad and State Bank of Patiala. Now, Yes Bank Limited, with the infusion of Rs. 6,050 crore (for a stake of 48.21%), is the latest associate bank for SBI. The bank has stated that the infusion of these vital funds is a collective effort by the RBI, Central Government, investors and banks in a bid to maintain the stability of the Indian financial system. The transfer of funds was done for Yes Bank on the 14th of March, 2020, as per reports.
SBI Chairman Rajnish Kumar has already stated that the objective of this investment is not earning financial returns but the retention of stability throughout the country’s financial systems. This is the biggest fund infusion for Yes Bank and HDFC and ICICI Bank Limited will be putting in Rs. 1,000 crore each as well. Axis Bank will be pumping in Rs. 600 crore while Rs. 500 crore will be invested by Kotak Mahindra Bank. IDFC First Bank will be investing Rs. 250 crore while Bandhan Bank and Federal Bank will be investing equal sums of Rs. 300 crore. The rescue effort towards Yes Bank has seen the RBI and Government bringing several private and public sector banks under one roof.
Yes Bank has been operating under the moratorium imposed by the RBI from the 5th of March, 2020, onwards after ex-SBI chief financial officer Prashant Kumar was appointed by the RBI as the administrator. The limitations will be lifted from Yes Bank on the 18th of March, 2020 at 6 PM as per Government statements. The scheme for reconstruction will be effective from 13th March, 2020, onwards. Under this specific scheme, the additional tier 1 bonds (worth approximately Rs. 8,415 crore) at Yes Bank will be written off to zero.