Four public sector lenders, including Indian Bank and Vijaya Bank, cut their benchmark lending rates by up to 0.45 per cent. From 1 April 2016, the interest rate on all loans including home loans, have been linked to the bank's MCLR (marginal cost of funds based lending rate).
Know which banks cut lending rate:
Punjab & Sind Bank
Punjab & Sind Bank reduced the overnight marginal cost of funds based lending rate (MCLR) by 0.45 per cent to 8.15 per cent from 8.60 per cent. It reduced the one-month MCLR by 0.40 per cent to 8.20 per cent, while one-year lending will be cheaper by 0.15 per cent to 8.55 per cent.
Chennai-based Indian Bank reduced the MCLR across all segments by 0.15 per cent. The revised rates are applicable with effect from Sep 07 2017.
Vijaya Bank tweaked interest rates in two segments, including for one-year tenor which will become cheaper by 0.15 per cent to 8.50 per cent.
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. The revised rates are applicable with effect from Sep 07 2017.
Loans to become cheaper
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 RBI to ensure fair interest rates to borrowers as well as banks.
MCLR also seeks to address the regulator's primary objective of expediting monetary policy transmission along with augmenting uniformity and transparency in the calculation methodology of lending rates. MCLR rates are revised every month. Ten Banks That Have Slashed Interest Rates On Savings Bank Accounts