Public sector lender Indian Bank on Monday announced reduction in its marginal cost-based lending rate (MCLR) by 5 basis points (bps) across all tenors. MCLR is the minimum lending rate below which a bank is not permitted to lend. The bank has stated that the latest rates will be applicable from January 3, 2020.
Indian Bank said in a filing to the Bombay Stock Exchange that 1-year MCLR now stands at 8.30 per cent, down from 8.35 per cent. Meanwhile, overnight MCLR has been cut by 5 bps to 7.90 per cent, 1-month MCLR has been reduced to 8 per cent, from 8.05 per cent earlier. Indian Bank said its 3-month MCLR has been lowered to 8.15 per cent, while 6-month MCLR would be 8.20 per cent.
Recently, state-owned United Bank of India and Allahabad Bank have also lowered MCLR by similar extent.
Both public and private sector banks have cut the MCLR by up to 20 basis points after RBI Governor Shaktikanta Das expressed confidence that the apex bank is not in a hurry to slash interest rates but it would work to make sure that the transmission to the customers is more effective. On December 5, the Reserve Bank of India (RBI) had kept the repo rates unchanged at 5.15 percent in its fifth bi-monthly monetary policy statement for 2019-20.Earlier, RBI had made it mandatory for banks to link all new floating rates personal or retail loans to key lending rates, also called external benchmarks, from October 1. This was done to ensure the banks immediately transfer the rate cut benefits to consumers.
State Bank of India, the country's largest commercial bank, was first to announce a 10 bps cut in its MCLR for its 1-year tenor. Bank of India also cut the 1-year MCLR by up to 20 bps across various tenors. The lender had reduced its MCLR for overnight rates by 20 bps while that for other tenors was cut by 10 basis points, a bank had declared, adding the overnight rates will stand at 7.75 per cent.
Ahead of the announcement, shares of Indian Bank closed Monday's trade at Rs 104.50 apiece, down 0.33 per cent.
By Chitranjan Kumar