Indian banks, led by market leader State Bank of India, announced sharp cuts to their lending rates after a recent surge in deposits, raising hopes that lower borrowing costs will help spark credit growth in Asia's third-largest economy.
SBI, the country's biggest lender by assets, said on Sunday it had cut its so-called marginal cost of funds-based lending rates (MCLR) by 90 basis points, while unveiling new products for mortgage loans, one of the fastest-growing areas.
Several other lenders including Punjab National Bank, Union Bank of India, Kotak Mahindra Bank and Dena Bank also cut their lending rates by 45-90 basis points across tenures. Analysts expect more lenders to follow suit.
Banks have received an estimated 14.9 trillion rupees ($219.30 billion) in old 500, and 1,000 rupees notes from depositors since Prime Minister Narendra Modi's government on Nov. 8 unexpectedly banned the banknotes in a bid to fight counterfeiting and bring unaccounted cash to the economy.
That had raised expectations banks would have room to cut lending rates, which is seen as vital to increase credit growth and spark a revival in private investments.