Good news for car and home loan owners. State Bank of India cuts base rate by 0.15 per cent to 9.70 per cent effective June 8.

This comes after Reserve Bank Governor Raghuram Rajan on Tuesday cut the key interest rate by 0.25 per cent, third time this year, meeting market and government expectations of boosting growth by lowering borrowing cost.

While the RBI cut the repo rate from 7.5 per cent to 7.25, it left all other policy tools like cash reserve requirement unchanged at 4 per cent and statutory liquidity ratio at 21.5 per cent.


Rajan also asked banks to pass on the rate cut to customers.


This mirrors his statement made on April 7, when he was severely critical of banks not passing interest rate cut to borrowers.He had said it was "nonsense' to assume that cost of funds has not fallen and nudged them to reduce rates.He further said that sooner the banks cut rate the better it would be for the economy. He was referring to the reluctance of banks to pass on the benefit of 0.50 per cent rate cut announced by the central bank since January.


By evening, State Bank of India reduced its base rate by 15 bps, followed by private sector lender HDFC Bank. Other banks towed the line in few days. The new base rate now stands at 9.85 per cent and is effective from April 10.