In a first-of-its-kind move that will ensure faster monetary transmission, the nation's largest lender State Bank of India, which controls nearly a quarter of the banking system, Friday announced linking of its savings deposits rates and short-term loans to the RBI's repo rate. The new rates linked the external benchmark rate of the repo rate, will be effective May 1. The move will to a large extent speed up monetary.
The move will to a large extent speed up the monetary transmission process-which is banks passing on the rate cuts that the Reserve Bank announces to their borrowers without much delays--something that has been missing all these while and something that the RBI has been unhappy with. "To address the concern of rigidities in the balance sheet structure and address the issue of quick transmission of changes in the RBI policy rates, effective May 1, 2019, we've taken the lead in linking key pricing decision for savings bank deposits and short-term loans to the repo rate of the RBI," SBI said in a late evening statement.
Savings bank deposits above Rs 1 lakh constitutes around 33 per cent of SBI's total deposit books, SBI managing director PK Gupta said.