SBI links MSME loans to repo rate

Mumbai, Sep 24 (KNN) The country’s largest public sector lender, State Bank of India (SBI) has linked all its floating rate loans to individuals and Micro Small and Medium Enterprises (MSMEs) to the Reserve Bank of India's (RBI's) benchmark repo-rate.

"A few modifications have been made in the scheme effective October 1, 2019, to comply with the latest regulatory guidelines," the bank said in a statement.

Earlier in this month RBI came out with guidelines on the need for banks to link all their new retail loans and MSME loans to the external benchmark. 

However, SBI's report linked home loans were only open to people with a certain income level.

Meanwhile, taking a cue from SBI, some other banks have also linked their loans to an external benchmark. With the launch of this product the loan rates will drop, pushing down deposit rates too. 

Retail deposit rates, an important source of money for small savers, will be slashed as banks look to keep their margins comfortable.

Before RBI had mandated banks to link their rates to an external benchmark, SBI was the first to take lead by introducing floating home loans effective from July 1,2019.

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