SBI cuts MCLR for ninth straight month making auto, home loans cheaper

India's largest lender State Bank of India (SBI) has decided to reduce its Marginal Cost of Funds based Lending Rate (MCLR) by five bps across all tenors. The one year MCLR comes down to 7.85 per cent per annum (p.a) from 7.90 per cent per annum with effect from 10th February 2020. This is the ninth consecutive cut in MCLR in FY 2019-20, SBI said in statement. This will lead to a reduction in home and auto loan rates.

The lender also decided to slash interest rate on term deposits – retail and bulk – by 10-50 basis points (bps) across various tenors as it is sitting on a pool of surplus funds. The revised rates will come into effect from February 10, 2020.

The bank's credit grew by 6.8 per cent to Rs 23, 01, 669 crore in 12 months ended December 2019, driven by Retail-Personal Advances which clocked a growth of 17.49 per cent.

SBI chairman Rajnish Kumar in January 2020 had said, at the start of year bank had given guidance of 10-12 per cent growth in advances in FY20. But will be difficult to reach 10 per cent mark, reflecting weak demand for corporate credit.

Referring to resource position, SBI in a statement said, in view of surplus liquidity in the system, bank will realign its interest rate on Retail Term Deposits (less than Rs two crore) and Bulk Term Deposits (Rs two and above) February 10, 2020.

Its deposits rose by 9.9 per cent to Rs 31,11,229 crore in 12 months ended December 2019. The share of low cost deposits – current account and savings account – in total deposits declined by 51 basis points to 44.72 per cent in December 2019 from 45.23 per cent a year ago.

According to Reserve Bank of India, overall liquidity in the system remained in surplus in December 2019 and January 2020.

Average daily net absorption under the liquidity adjustment facility (LAF) amounted to Rs 2.61 trillion in December 2019.

In January 2020, the average daily net absorption of surplus liquidity soared to Rs 3.18 trillion. The Reserve Bank conducted four auctions involving the simultaneous purchase of long-term and sale of short-term government securities under open market operations (OMOs) for a notified amount of Rs10,000 crore each during December 2019 and January 2020. Reflecting these operations, the 10-year G-sec yield softened cumulatively by 15 bps between December 19, 2019 and January 31, 2020.