Floating retail loans such as mortgages and mortgage loans are cheaper as major banks have influenced the recent 25 basis point reporate reductions by the RBI’s Monetary Policy Committee (MPC).
Banks such as the National Bank of India, National Bank of Punjab, Bank of Baroda, Union Bank of India and Bank of India have reduced their external benchmark lending rates (EBLR) to the extent of reporate reductions, causing equal monthly installments. The borrower comes down to some extent.
This softening of lending rates could be ready until the end of the current fiscal year and create intense competition between banks, bankers say.
For example, SBI reduced EBLR from 9.15% + CRP (Credit Risk Premium) + BSP (Business Strategy Premium) to 8.90% + CRP + BSP. Linked Linked Loan Rate (RLLR) has been reduced from 8.75% + CRP to 8.50% + CRP.
Reporate reduction
MPC has been effective since February 7th, reducing its repository rate to 6.50% to 6.25%.
Sanjay Agrawal, senior director of CareEdge Ratings, observed that sending Repo rates is reduced to EBLR, and therefore some of the retail asset classes are seamless, but not in the case of deposit rates.
“Deposit rates are a function of liquidity. For the past 15 days, the liquidity of the banking system has been tough. Corporate bond yields have risen. Therefore, deposit rates remain at current levels for more time. It is expected that wholesale loan fees (associated with fund-based lending rates/MCLR marginal costs) will remain sticky,” he said.
