State Bank of India to cut lending rates by a sharp 50 bps

State Bank of India, the country's largest lender will reduce lending rates by a sharp 50 per cent, thereby effecting a faster transmission of the Reserve Bank of India's policy of low interest rates and boost lending.

SBI managing director A Krishna Kumar said the bank has already started rate adjustments for retail loans like housing and auto loans, the most interest-sensitive of all bank advances.

"We have already started adjustment of rates on the loan side. Auto loan rates will be cut today or tomorrow,'' Krishna Kumar said.

SBI is planning to follow this up with a reduction in rates for lending to small and medium enterprises, he said, adding, the bank will also soon consider a proposal to reduce interest rates on deposits and advances across the board.

He said a reduction in lending rates will not have any great impact on the bank's profitability as nearly half (47 per cent to be exact) of the deposits with the bank are current accounts and savings accounts.

The move comes amidst reports that the government has given a diktat to public sector banks to reduce interest rates by a minimum 50 basis points forthwith.