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Credit cost, NPAs restrict banks to cut MCLR: SBI
Though the Marginal Cost of Funds-based Lending Rate (MCLR) is expected to be in tandem with the policy rates, banks are hesitant to reduce it due to cost of credit and deposits and NPAs positioning, says country\'s largest lender State Bank of India (SBI). The Reserve Bank of India (RBI) on Wednesday cut the key lending rates by 25 basis points (bps).
Mumbai : Though the Marginal Cost of Funds-based Lending Rate (MCLR) is expected to be in tandem with the policy rates, banks are hesitant to reduce it due to cost of credit and deposits and NPAs positioning, says country's largest lender State Bank of India (SBI). The Reserve Bank of India (RBI) on Wednesday cut the key lending rates by 25 basis points (bps).
“As far as the MCLR is concerned, it is a function of multiple components. It is intended that the MCLR is in tandem with policy rates,” SBi Managing Director and CEO Dinesh Khara said in an interview.
“But, other factors like the cost of deposit and cost of credit, which are a critical determinant of MCLR, and also non-performing assets (NPAs) positioning, are restricting banks from cutting the MCLR. The policy rates are a critical component, but not the only component affecting the MCLR,” he said.
The banking system is rolling into a lot of liquidity and they would like to deploy that liquidity into the right kind of investments and projects coming up for consuming this kind of liquidity, Khara said. The advances growth in general is 6 per cent in the current fiscal while the retail advances are doing well at 10-12 per cent. Retail advances are still linked to base rate while the corporate advances are getting aligned to the MCLR.
