Public sector banks (PSBs) to implement the finance minister’s instruction to link lending rates to the repo (the rate at which RBI lends to banks). The central bank revises this repo rate to influence banks to change their own lending and deposit rates.
Bankers also see deposit growth picking up with the government decision to release payments blocked in public sector and in refunds under GST. Anticipating growth in deposit and to create headroom to bring down lending rates, SBI on Friday reduced retail term deposit rates by 10-50bps across tenors as well as bulk term deposit rates by 30-70bps across tenors (100 bps = 1% point). SBI was the first to link its home loan rates to the repo.
Also, Union Bank launches two products the repo-linked home loan and repo-linked vehicle loan at 8.25% and 8.6% respectively. The home loan linked to the repo rate provides 35bps benefit over the existing rate, while the vehicle loans are 40bps cheaper than the present one.