SBI moderates SME loan rates by 50-350 bps

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SME Times News Bureau | 16 Jun, 2012
Days ahead of the RBI reviewing the interest rate, State Bank of India (SBI) has reduced its loan rates for the small and medium enterprise (SME) and agriculture sectors by 50-350 basis points (bps), reports media.

"With a view to provide some relief to customers at a time when economy is slowing, we have decided to review the interest rate structure by way of realigning the existing spreads to the tune of 50 basis points (bps) to 350 bps," SBI Managing Director and Group Executive (National Banking) A Krishna Kumar said.

The rates cut are effective from June 1.

Kumar, however, said the base rate will remain unchanged at 10 percent, which is higher than its immediate competitor ICICI Bank's 9.75 percent. He said the lower rates will not be applicable to loans sanctioned under specific schemes, export credit for which separate interest rate structure is in place.

Meanwhile, SBI Chairman Pratip Chaudhuri told a TV news channel that today's cut is different. "In May we had dropped the car loan rates and rates for education loans.... We are really trying to be selective ...we have brought in extensive cuts in interest rates, particularly for the SMEs and the commercial sector.

"At present, we don't think we need to extend it to the base rate. We are re-balancing our portfolio. Our portfolio got skewed in favour of home loans," he added If RBI cuts CRR by 1 percent SBI will drop lending rates first and then deposit rates will be calibrated depending on what other forms of savings are offering, he said.

Asked about the exclusion of these segments and individual borrowers, Kumar said their rates are already low and competitive as the bank had brought down the pricing on them in the past two months.

Kumar attributed the delayed announcement to the time taken for upgrading the IT system with the new rates. Asked whether the bank will lower deposit rates, Kumar said "definitely, if the RBI lowers interest rates on Monday."