Four public sector banks including Indian Bank and Vijaya Bank have cut their benchmark lending rates by up to 45 basis points.
Punjab & Sind Bank also reduced the overnight marginal cost of funds based lending rate (MCLR) by 45 bps to 8.15% from 8.60%. It reduced the one-month MCLR by 40 bps to 8.20%, while one-year lending will be cheaper by 15 bps to 8.55%.
Chennai-based Indian Bank reduced the MCLR across all segments by 15 bps. Vijaya Bank revised interest rates in two segments, including for one-year tenor which will become cheaper by 15 bps to 8.50%. IDBI Bank also reduced MCLR by 5-10 bps across various tenors.
“The reduction in MCLR is expected to positively impact loan growth, thereby supporting the growth impulses in the economy,” the bank said in a statement. With the reduction in benchmark rates, home, car and other loans linked to MCLR would become cheaper.
Banks switched to MCLR as their new benchmark lending rate from June last year, replacing the base rate system for new borrowers. It is calculated on the marginal cost of borrowing and return on net worth for banks. It was introduced by Reserve Bank of India (RBI) to ensure fair interest rates to borrowers as well as banks. MCLR also seeks to address transparency in the calculation methodology of lending rates.
MCLR rates are revised every month.