SBI, other banks expected to cut lending rates in Jan'17

Country's largest lender State Bank of India, and a few other banks are likely to cut lending rates in early January, said people with knowledge of the matter. 

As per a story in leading financial journal Economic Times, the cut in lending rates could give consumption a much-needed boost, having slumped in the wake of demonetisation as people are unwilling to spend on non-essential items amid a currency shortage.

People considering home and car purchases can look forward to cheaper rates due to the liquidity that's flooded the banking system with the deposit of old notes, especially since corporate loan demand remains weak. SBI couldn't be reached for comment. 

Cash withdrawal limits are, however, expected to stay in place even after the December 30 deadline by which the demonetised Rs 500 and Rs 1,000 notes have to be deposited.

At an Indian Banks' Association meeting last week, chief executives of some large banks explored the possibility of a cut in interest rates on loans following discussions with the finance ministry, said banking sources. 

Some bankers believe such a move could revive sentiment amid the dip in consumption due to the currency shortage induced by demonetisation. SBI has pegged its lending rate at 8.90% for a year, among the lowest in the industry.