State Bank of India cuts MCLR-based lending rate by 5 bps to 7.95%

State Bank of India, the country's largest lender, today announced a 5 basis point reduction in its marginal cost-based lending rates (MCLR) across maturities, effective Wednesday, its first lending rate cut in 10 months.

SBI will lower the 1-year MCLR to 7.95 per cent from 8 per cent, according to a notification issued today.

This could marginally bring down SBI's retail lending rates, including housing and consumption loans.

The pace of reduction in lending rates by SBI as also the entire banking system, however, has been slow compared with the 200 basis point reduction in the Reserve Bank's policy interest rate since January 2015. 

The RBI last year unveiled the MCLR with the intention of removing much of the discretion commercial banks have to set lending rates. However, the pace of lending rate cuts by banks has lagged the reduction in RBI's policy rates.

RBI is keen that banks lower lending rates further to accelerate credit growth and private investment in an economy growing at its slowest in more than three years. Bank loans last financial year grew at their slowest pace in more than six decades.

With no major corporates looking to borrow and banks flush with deposits after last year's demonetisation drive, banks led by SBI had last sharply cut lending rates under the MCLR system in early January.