The State Bank of India, the country's largest lender, today announced a 0.75 per cent reduction in its prime lending rate effective 1 January 2009. SBI's prime lending rate now stands reduced at 12.25 per cent, the bank said in a press release today.
SBI has also slashed deposit rates by 0.25 to 1.0 percentage points across all maturities.
Deposits for 1-2 years will now attract an interest rate of 8.5 per cent as against the earlier 9.5 per cent while deposits having maturity of two years to less than 1,000 days will carry interest of 8.75 per cent (9 per cent for the earlier special deposit scheme carrying 10 per cent interest rate), the bank said.
The new rates are applicable across all retail and corporate lending segment and will benefit its existing customers also, SBI said in a release.
SBI's announcement comes a day after housing finance major HDFC reduced its interest rates by 50 basis points for loans of more than Rs20 lakh for both existing and new customers and introduced a new slab for loans below Rs20 lakh.
Union bank of India also reduced its deposit rates, while another state-run lender Canara Bank announced reductions in their deposit and lending rates for micro, small and medium enterprises.
SBI's move is expected to push more and more banks in the country into reducing lending and borrowing rates over the next few days.
SBI said that rates are being reduced in keeping with the drop in cost of funds. The reduction in deposit rates will protect SBI's margin, the statement added. SBI said it also expected a further drop in inflation.