New Delhi, 7 June (IANS). According to a new SBI report, after the recent cuts in policy rates, the loan rates are expected to decline about 30 basis points (BPS).
Statistics compiled by State Bank of India (SBI) Research stated that this change will first be felt in loans associated with the External Benchmark Lending Rate (EBLR), which is about 60 percent of all loans given by Scheduled Commercial Banks (ASCB).
The report stated that due to this high stake of loans associated with EBLR, the impact of policy rate cuts will be passed quickly, making the loan cheaper for many borrowers.
“The move aims to reduce the cost of taking loans and promote demand in the economy,” the report said.
However, the fall in debt rates may cause damage to the profit margin of banks. To help reduce this pressure, the Reserve Bank of India (RBI) has also reduced the cash reserve ratio (CRR), which will reduce the cost of funds for banks.
Although CRR cuts may not directly change the deposits or lending rates, SBI said that this may help banks to improve their net interest margin (NIM) by 3 to 5 bps.
In addition, the report states that CRR cuts may improve liquidity in banking systems. This is expected to reduce the amount of base money and increase the money multiplier by 20 to 30 bps, which can promote better credit flow in the economy.
Meanwhile, banks have already started cutting fixed deposits (FD) rates. Since February 2025, FD rates have decreased by 30 to 70 bps, and SBI hopes that the trend will continue to be cut in the coming months.
Further, SBI warned that although low rates benefit borrowers, banks may face pressure on their profit margin.
According to the report, “its exact impact will be different bank by bank, but there is a possibility of decrease in margin overall.”
Finally, the report states that any change in the monetary policy will depend on how the economy performs. Although the scope for further cuts in rates is limited, large -scale transfer transfer to the government from RBI has improved the government’s financial situation. Currently, SBI does not expect any further change in policy rates in the next quarter.
-IANS
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