State Bank of India today announced a reduction in lending rates by 0.25 per cent for those who availed of loans before July 2010.
The bank's new benchmark prime lending rate (BPLR) has been set at 14.50 per cent. The new rate will be effective from September 27.
Earlier on September 18, the bank had cut the minimum lending rates, or base rate, by a similar percentage on RBI's cues. The central bank had cut the cash reserve ratio a day earlier by 0.25 per cent to 4.5 per cent.
The base rate mechanism came into effect in July 2010 as a new transparent alternative to the earlier benchmark prime lending rate.
Of Rs 7.81 lakh crore domestic loan book (advances), around Rs 1 lakh crore is still on the BPLR, SBI Chief General Manager for Finance Control Sunil Pant said. The remaining loans are on the base rate regime.
As of the June quarter, the bank's total loan book stood at Rs 9.59 lakh crore which includes foreign loans and loans to staff.
Asked about the impact on margins, he said the annual impact will be under Rs 250 crore in terms of interest income, and as the current fiscal is halfway through, the impact on the margin will be a minuscule 0.01 per cent.
The impact of the base rate cut on the margins would be around 0.04 per cent.