The State Bank of India (SBI) on Thursday slashed interest rate on loans to exporters by 0.5% that could boost the Indian exports at a time when the economy is witnessing a lower growth rate.
SBI’s cut in the interest rates comes soon after the Reserve Bank of India (RBI) raised the export refinancing limits of the banks.
“SBI has cut interest rates for exporters by 50 basis points effective last Saturday (June 23, 2012),” said Pratip Chaudhuri, chairman, SBI. “The decision was taken at asset liability committee (Alco) meeting last Saturday.”
Export credit is linked to the bank’s base rate and varies from 2.5% to 6% above that depending on various factors including credit rating of the exporter. SBI base rate is 10%.
Banks on an average have been borrowing nearly R1 lakh crore from the RBI daily due to tight money supply conditions.
The RBI’s move that came a few days ago could release around R30,000 crore into the system resulting in a better liquidity conditions, RBI had said.