THE HIMALAYAN TALK: PALASH BISWAS TALKS AGAINST CASTEIST HEGEMONY IN SOUTH ASIA

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Thursday, June 28, 2012

SBI cuts interest rate for exporters by half a percentage point

SBI cuts interest rate for exporters by half a percentage point

Mumbai, June 28 (PTI): The State bank of India (SBI) has cut interest rate on loans to exporters by half a percentage point within days of the Reserve Bank of India increasing the export refinancing limits of banks.        

"SBI has cut interest rates for exporters by 50 basis points effective last Saturday (June 23, 2012). The decision was taken at asset liability committee (Alco) meeting last Saturday," SBI Chairman Pratip Chaudhuri said.

Export credit is linked to the bank's base rate and varies from 2.5 per cent to 6 per cent above that depending on various factors including credit rating of the exporter. SBI's base rate is 10 per cent.

While leaving the key interest rates and cash reserve requirements of banks unchanged at its mid-quarter review last week, the RBI had enhanced liquidity to exporters by increasing the refinancing limits of the outstanding rupee export credit for banks called export credit refinance (ECR) to 50 per cent from 15 per cent.        

The move, which RBI claimed was an indirect cut in the per cent indirect Cash Reserve Ratio (CRR), will release Rs 30,000 crore into the system, thereby increasing the overall liquidity conditions.

Banks on an average have been borrowing nearly Rs 1 lakh crore from RBI daily due to tight money supply conditions.

The interest rate charged on the ECR facility is equivalent to the Repurchase Agreement (repo rate), which is currently 8 per cent.

SBI has recently announced up to 3.5 per cent cut in lending rates to top-rated corporates, Small and medium enterprises (SMEs) and farm loan borrowers but not for individuals, effective June 1.

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