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By Nupur Anand
MUMBAI - India's largest lender, State Bank of India, on Friday slashed its lending and deposit rates, a rare move that followed on the heels of an Indian central bank rate cut to tackle the economic fallout from the coronavirus pandemic.
SBI reduced its lending rates by 75 basis points, passing on the entire repo rate cut made by the Reserve Bank of India (RBI)earlier on Friday, the lender said in a statement.
"The impact will be felt on the net interest margin (a key indicator of bank's profitability) but they have no other option but to pass it on in the current economic situation," said Asutosh Mishra, research analyst at Ashika Stock Broking.
Typically, other Indian lenders tend to follow the SBI, which means similar rate cuts are likely across the banking industry, added Mishra.
The central bank on Friday also allowed banks to provide a three-month moratorium on all term loans, a relief to businesses affected by India's three week country-wide lockdown.
"The disruption is across and almost 75% of the sectors are impacted so everyone will benefit (from the move) but the cash position of each corporate is different and that is where we will have to do a case-to-case basis thing," Rajnish Kumar, Chairman of SBI said on Friday, before the SBI announced its rate cuts.
The new rates are effective from April 1.
The lender has also reduced interest rates on retail and bulk deposits by between 20 to 100 basis points across various tenors. Those rates will be effective from March 28.
(Reporting by Nupur Anand; Editing by Alexandra Ulmer)