Oriental Bank of Commerce joins SBI, BOB in a race to cut base rate on home loan

After public sector banks like State Bank of India (SBI), Andhra Bank and Bank of Baroda (BoB), another public sector bank Oriental Bank of Commerce (OBC) announced a reduction of 0.05 percent in its base rate for its existing home loan borrowers. With the announcement, it base rate now stands at 9.45 percent. It will come into force from October 3.

"This is to inform that the bank has revised the base rate from 9.50 per cent per annum to 9.45 percent per annum with effect from 03.10.2017," Oriental Bank of Commerce said in a regulatory filing.

Yesterday, three public sectors banks- State Bank of India (SBI), Andhra Bank and Bank of Baroda lowered their base rates for borrowers. The announcement has come days ahead of monetary policy announcement by Reserve Bank of India (RBI) and will become effective from Oct 1.

The reduction in base rate will benefit all those home loan borrowers, who had availed home loans before April 1, 2016.
In August this year, second largest public sector bank Punjab National bank (PNB) also cut its base rate by 0.20% to 9.15%.
A base rate differs from the lending rate. While the former is the minimum rate of interest that a bank is allowed to charge from its customers, the latter is sum of base rate and spread on it.

In April 2016, banks started lending loans on the new benchmark-marginal cost of funds. The new lending rate came to be known as marginal cost based lending rates (MCLR). It is closely linked to the actual deposit rates and is reset across different periods.  All home loans taken after April 2016 are linked with this rate.  At present, they are lower than the base rates.

While borrowers with a loan-linked to base rate have an option to link their loans to the MCLR, many customers have not migrated to it, and have home loan linked to base rate.

Here's a look at the new and old base rates across banks:

Click here to Enlarge