Housing, auto and corporate loans are expected to become cheaper since many Public Sector Banks on Tuesday steeply reduced the benchmark lending rate by up to 1.48 percent after spurt in deposits following demonetisation. Taking a cue from the State Bank of India (SBI), other lenders including largest private sector lender ICICI Bank and state-owned Oriental Bank of Commerce and Andhra Bank announced cut in marginal cost of funds based lending rate (MCLR).
The State Bank of India chief Arundhati Bhattacharya has pointed out that the mega merger of its five associate banks and Bharatiya Mahila Bank could be pushed to the next financial year since the Government’s notification is still awaited. The SBI along with PNB and Union Bank of India earlier on Monday reduced the lending rate by 0.9 percent after Prime Minister Narendra Modi in his New Year eve address urged the banks to focus on the needs of poor and lower middleclass and middle class.
The reduction in lending rates may prompt increase in credit off take which has moderated substantially putting burden on the balance sheet of banks. Highlighting the insights of the merger process in the last quarter, the SBI chairman said the government notifies the merger immediately, adding it will not be wise on the part of banks as there are a lot of IT system changes during the annual closing.
She added that the government’s stake in these banks would stand at around 59 percent post the merger of five associate banks and Bharatiya Mahila Bank.