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Banks slash MCLR, set for repo linked deposit, loan rates

While State Bank of India (SBI) cut MCLR by 15 basis points within hours after the RBI rate reduction, Bank of India has cut MCLR by 25 bps, Syndicate Bank by 25 bps, IDBI Bank between 5-15 bps, Allahabad Bank by 15-20 bps and Bank of Maharashtra by 10 bps.

Public sector banks have started cutting the marginal cost-based lending rate (MCLR) following the Reserve Bank of India (RBI) decision to slash its Repo rate by an unconventional 35 basis points in the bi-monthly monetary policy review on August 7. Several banks also announced that they will soon come out with repo rate linked deposit and loan products.

While State Bank of India (SBI) cut MCLR by 15 basis points within hours after the RBI rate reduction, Bank of India has cut MCLR by 25 bps, Syndicate Bank by 25 bps, IDBI Bank between 5-15 bps, Allahabad Bank by 15-20 bps and Bank of Maharashtra by 10 bps. Union Bank of India said it expects its MCLR to soften up to 15 bps and will soon link its housing and vehicle loan portfolio to the repo rate from the current MCLR.

MCLR for other tenors have also been reduced. We have similar guidance for the coming months as well when we will endeavour to pass on the benefits of rate cuts, the Bank of India said in a statement.

Andhra Bank on Friday announced a cut in the MCLR by 25 basis points across all five tenors- overnight, one month, three months, six months and one year. The bank said it would soon introduce repo rate linked deposit and loan products.

Canara Bank has also cut its MCLR by 10 basis points across all tenors, effective from August 7. With this revision, Canara Bank has cumulatively reduced its MCLR by 20 bps during the last six months and thus, one-year MCLR has come down to 8.50 per cent per annum from 8.70 per cent earlier. Canara Bank said it would be announcing further reduction in lending rates soon. It would be rolling out repo rate linked loan products shortly. With this, the customers desirous of floating rate loans will have two options MCLR-linked loans or repo rate-linked loans. A customer opting for the repo rate-linked loan will get a direct benefit whenever the RBI cuts the repo rate. SBI was the first bank to link certain deposit and loan products to the repo rate. While banks are linking rates with repo rate on their own, the RBI has not yet come out with any instruction on the issue. Chennai-based Indian Overseas Bank reduced its MCLR by 15 basis points in one year and above tenors and 10 basis points in below one year tenors with effect from August 10.

Punjab National Bank MD Sunil Mehta said, Overall banks have reduced the interest rate on fresh rupee loans by 29 bps. With improvement in liquidity position and reduction in deposit rates offered by banks, further reduction in lending rate is expected.

… We expect higher transmission of monetary policy action and stance by the banks in the weeks and months ahead, RBI Governor Shaktikanta Das said while unveiling the monetary policy on Wednesday.