IDBI Bank on Monday reduced the marginal cost of funds based lending rate (MCLR) for overnight, one-month, three-month and six-month tenors by 5 basis points (bps) to 7.95%, 8.25%, 8.45% and 8.65%, respectively, according to the lender s website.
IDBI Bank s overall advances fell by 16.8% year-on-year (y-o-y) to nearly Rs 1,525 crore as of December 2018.
In a recent development, SBI has responded to the RBI s desire for products which have faster transmission of rates by selectively introducing repo-linked savings and cash credit products, said analysts at KIE. From May 1, 2019, all SBI savings deposits above Rs 1 lakh would be priced at 275 bps below the prevailing repo rate of 6.25%, which implies interest on savings accounts unchanged at 3.5%.
While the cash credit loans of over Rs 1 lakh would be 225 bps in excess of the repo rate, which implies 8% rate of interest compared to MCLR at 8.55%, said the experts at KIE. Linking the savings deposit rate with policy rate will help faster repricing of liabilities for banks and help in protecting their profit margins, said Anil Gupta, V-P, Icra. More banks, especially all the PSBs and a few large private banks, are expected to follow the move by linking their deposit and lending rates to RBI s repo rate, Gupta added.
Earlier this month, HDFC Bank had also reduced the MCLR for two and three years tenors by 5 bps to 8.85% and 9%, respectively, after back-to-back rate hikes in December and January. HDFC Bank has been consistently gaining market share across retail product segments, including personal loans and auto loans. Strong capitalisation and liquidity levels should enable the bank to sustain this growth momentum over the next few years, said analysts at Motilal Oswal.
Bank of Baroda has also reduced the MCLR by 10 bps for overnight, one-month, three months, six months and one-year tenors to 8.25%, 8.30%, 8.40%, 8.60% and 8.65% with effect from March 7, according to the lender s website.
BoB has been reporting healthy traction in domestic loan growth while operating metrics are showing a gradual improvement. We expect fresh slippages to moderate over FY20 and estimates of FY21 while steady improvement in provisioning coverage should ease incremental provisioning requirements, said analysts at Motilal Oswal.
PNB had also cut MCLR by 10 bps and Kotak Mahindra Bank reduced MCLR by 5 bps for over-night, three months, six months and one-year tenors. While, Allahabad Bank reduced the MCLR by 10 bps across all tenors in February. PNB s business momentum continues to be soft with 4% y-o-y dip in loan growth following over 60% y-o-y fall in overseas advances and below trend domestic growth at sub-10% level. More importantly, deposit growth seems to be under pressure, said analysts at Edelweiss.
ICICI Bank had last cut its MCLR on one-month, three-month and six-month tenors by 10 bps each to 8.55%, 8.60% and 8.75%, respectively, in December 2018. ICICI Bank s loan growth at both consolidated book level & standalone levels have been similar; we believe that loan growth at subsidiaries is coming from higher risk-weight asset class, said analysts at Jefferies.