benchmark lending Mumbai, June 24 State Bank of India on Wednesday said it will cut its benchmark prime lending rate by 50 basis points to 11.75 per cent with effect from June 29. US benchmark lending
The latest action by India¡¯s largest bank is expected to encourage other public sector banks also to pare their lending rates. benchmark lending SBI had earlier cut its term deposit rates by 25 basis points across all maturities with effect from June 15. USA benchmark lending The last time the bank cut its BPLR (by 75 basis points to 12.25 per cent) was in January. benchmark lending All loans including home loans, which are linked to BPLR, will benefit from the latest rate cut. With India Inc borrowing below BPLR from banks, SBI¡¯s corporate customers too would gain from the rate cut. Currently, the bank is offering new loans for home, SMEs, to farmers against cold storage and warehouse receipts at 8 per cent, and for new cars at 10 per cent. According to a senior SBI official, around 60 per cent of the bank¡¯s loan portfolio will be impacted by the lending rate cut. ¡°Since we also reduced deposit rates recently, there won¡¯t be much impact on our margins. Immediately, margins will be impacted by 5-6 basis points. But as deposits get re-priced progressively and as our loan book grows the impact won¡¯t be much.¡± benchmark lending Another PSU bank, Union Bank of India had on Monday announced a 25 basispoint reduction in the PLR to 11.75 per cent, with effect from July 1.
benchmark lending Related Stories: SBI cuts deposit rates by 25 basis points across the board SBI Chairman sees softening bias in interest rates SBI pegs SME portfolio growth lower at 25%
ECB auction slashes euro bank lending rates
LONDON¡ªThe cost of three-month euro loans between banks slid Thursday by its biggest amount in six months in the wake of the European Central Bank's successful 12-month money auction, while the equivalent dollar rate barely eased to a new low after a key policy statement from the U.S. Federal Reserve. The cost of three-month loans in euros -- known as the European Interbank Offered Rate, or Euribor -- fell a little over 0.04 of a percentage point to 1.14 percent after the European Central Bank successfully concluded its first 12-month refinancing operation, flooding the banks with cash and super-low interest rates in the hope they will start lending more normally again. The 12-month rate also dropped around 0.04 percentage points to just below 1.54, while the one-month rate dropped a massive 0.06 percentage point to just above 0.78 percent The euro442 billion ($617.83 billion) it allotted Wednesday to banks in the 16-country euro zone at the benchmark interest rate of 1 percent was the largest amount the European Central Bank has ever done in a single auction. Analysts said the implications on money markets is to put downward pressure on short-term rates but may not do much to boost bank lending -the real aim of the bank's extra loans. "Banks may instead be tempted to use the new facility simply to restructure their obligations to the ECB, reducing their use of shorterterm ECB liquidity by a corresponding amount and offering no real economic stimulus," said Geoffrey Yu, an analyst at UBS. benchmark lending Time will tell if the injection works, especially as the evidence is complicated at the moment by the upcoming coincidence of the month-end and the quarter-end. "Once quarter-end has passed, any change in lending activity should be more easily visible, but right now, any subtle changes that might occur could be obscured by month and quarter-end activity," said David Keeble, global head of interest rate strategy at Calyon Credit Agricole. The European Central Bank has been criticized by many for not being as aggressive as the U.S. Federal Reserve or the Bank of England both in cutting interest rates or pursuing unconventional measures, such as boosting the money supply. Whereas the U.S. and Britain have shown some clear signs that recovery may not be too far away, the euro zone economic data has generally been somewhat downbeat, though admittedly not as bad as a few months ago.
benchmark lending In May, the European Central Bank cut its main interest rate to a record low of 1 percent as well as extending the maximum maturity of its bank lending from six months to 12 months and pledged to provide unlimited liquidity at the new, longer maturity. It also unveiled a limited asset purchase program of buying euro60 billion worth of euro-denominated covered bonds -- a low-risk type of asset-backed securities. The hope behind such a policy is that it may raise prices of assets on bank balance sheets, keep prices from falling for too long or too far, and well as giving the banking system more funds to lend to homeowners and businesses. In contrast to the measures announced by the ECB, the Fed and the Bank of England have cut their interest rates to below 0.25 percent and 0.5 percent respectively and unveiled much larger programs to boost the money supply to get banks lending again. The British Bankers' Association said the rate on three-month loans in dollars -- known as the London Interbank Offered Rate, or Libor -- fell 0.003 of a percentage point to a new low of 0.6012 percent after the Fed said it would likely be keeping its benchmark rate unchanged at a range between zero and 0.25 percent for several months yet. Elsewhere, the three-month British rate was also down 0.01 percentage point to 1.21 percent. Interbank lending rates are important for the wider economy because they determine the cost of loans for households and businesses. They shot higher during the credit crunch but have been coming back down in recent weeks in the wake of massive efforts by governments and central banks to get lending going again.