More banks slash lending rates: ICICI, Kotak Mahindra, Dena Bank follow SBI

Two private sector banks slashed a key lending rate on Monday as a surge in deposits following the ban on high-value bank notes sparked a race among the country’s lenders to woo consumers with cheaper home and vehicle loans.

The rate cuts came a day after the country’s biggest lender, State Bank of India (SBI), slashed the so-called marginal cost of funding-based lending rates (MCLR) by a steep 0.90%.

While ICICI Bank, the country’s largest private lender, slashed its MCLR by 0.70%, Kotak Mahindra Bank announced a 0.45% cut. Another public sector lender, Dena Bank, also announced a 0.75% cut in its MCLR for one-year loans.

Banks base their final interest rate to customers on the MCLR and the rate cuts, one of the steepest since the 2008 global financial crisis, will lower interests on loans for new homes and vehicles.

SBI also unveiled on Monday new products and offered customers the option of migrating from the standard base rate to MCLR, adopted by banks last June and revised every month.

SBI chairperson Arundhati Bhattcharyya hinted there could be further rate cuts.

Read: Cheaper loans in store: SBI, Union Bank and IDBI slash lending rates

“We (SBI interest rates) are already far below the market, so we will see how this works. If the competition is high, we may change it later,” Bhattacharya said at a press conference.

Other state-run lenders such as Punjab and National Bank, Union Bank of India, IDBI Bank and State Bank of Travancore have also announced cuts in lending rates.

An estimated Rs 14.9 lakh crore was injected into banks through deposits since Prime Minister Narendra Modi’s surprise announcement scrapping the old Rs 500 and Rs 1,000 currency notes on November 8.

In a New Year Eve speech, Modi had asked banks to “keep the poor, the lower middle class, and the middle class at the focus of their activities” and to act with “public interest” in mind.

Any signs of a revival in credit could ease some of the worries from the government move, which sparked a severe cash shortage and paralysed parts of Asia’s third largest economy.

Although India’s gross domestic product grew 7.3% in the July-September quarter from the year earlier, the fastest pace of growth among large economies, much of that was led by consumer demand.

(With agency inputs)