SBI Report: After cutting RBI rates, loan interest rates declined by 30 BPS

News India Live, Digital Desk: According to a report by the State Bank of India (SBI), about 30 basis points (BPS) are expected to decline in debt rates after recent policy rates. The report highlights that its immediate effect will appear on loans associated with the external benchmark loan rate (EBLR), which make about 60 percent of the loan book of all scheduled commercial banks (ASCBs).

SBI said, “The heavy cuts in policy rates are expected to impact immediately on the loan book related to EBLR, with ASCB’s share of 60 percent. Thus the immediate effect on the average borrowing rate can be around 30. ” The report said that the heavy cuts in policy rates will have an impact on the loan related to EBLR, which will reduce the cost of borrowing for many customers. However, this decline in borrowing rates can affect the margin of banks to help manage this effect.

SBI said, “The reduction in CRR cannot translate any changes mathematically and borrow rates, however, it can have a positive impact on the margin (3-5 BPS on NIM)”.

The report estimated that a low CRR can improve bank margin or net interest margin (NIM) from 3 to 5 bps. CRR cuts will also reduce base money (M0) in the system, which will increase the money multiplier from 20 to 30 bps, which can have a positive effect on overall liquidity.

Meanwhile, banks have already begun to reduce fixed deposits (FD) rates. Since February 2025, FD rates have been reduced by 30 to 70 bps. The report is expected to continue this trend, there is a possibility of further cuts in the coming months.

Previous data shows that the cut in policy rates usually puts pressure on the bank margin. While the exact effect will vary in individual banks, general contractions in NIMs are expected. The SBI report states that the future path of monetary policy will depend on economic data and emerging circumstances. While the policy location is limited, the recent large profit transfer to the government from RBI has improved fiscal flexibility. Currently, the report is expected to have no change in policy rates in the next quarter.

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