Country’s largest lender State Bank of India has decided to reduce Marginal Cost of Funds based Lending Rate (MCLR) on short term loans by 5-10 basis points to boost credit off take and revive demand.
The revision, 14th consecutive reduction in the Bank’s MCLR, will come into effect July 10, 2020, Bank said in statement on Wednesday.
With this revision, SBI’s MCLR upto three-months tenor comes down to 6.65 per cent per annum, which is on par with the External Benchmark linked lending rate (EBR), SBI said.
Two public sector banks — Canara Bank and Bank of Maharashtra — have already announced reduction in their MCLR by 10 basis points and 20 basis points, respectively, across all tenors, effective July 7.
According to rating agency CARE rating, the overall credit growth in the banking sector has remained flat for the fortnight ending June 19, 2020.
The credit growth has been nearly at half the level during the last two fortnights at 6.2 per cent, compared to last year’s level of 12 per cent (June 21, 2019) and 12.3 per cent (June 07, 2019).
The credit disbursal has been impacted by risk aversion in the banking system and weak demand. Though the lockdown was opened since June 08, 2020, the metropolitan regions which accounts for about 63 per cent of bank credit are still not open completely, hence credit pickup is weak, CARE said.
Banks are choosing their credit portfolios with a higher degree of caution despite decline in interest yields; hence credit growth of banks is expected to remain slower in the near term.