India’s largest bank on Friday reduced its marginal cost of lending rate (MCLR) by 5 basis points (100 bps = 1 percentage point) across all tenors effective February 10, 2020. The one-year MCLR comes down to 7.85% per annum from 7.90% with effect from February 10. This is the ninth consecutive cut in MCLR in FY20.
The rate revision is on account of a reduction in the cost of funds before the policy. “The impact of the recent RBI policy measures and reduction in deposit rates will be reflected in the next review of MCLR,” the bank said in a statement. The one-year MCLR is the benchmark used by SBI for loans before October 2019 and non-retail loans. New borrowers get their loans at rates linked to the repo rate. The MCLR reduction would mean that older customers stand to benefit.
The bank also reduced its deposit rates by 10-50 bps citing surplus liquidity in the system. This lowered interest rate on retail term deposits (less than Rs 2 crore) and bulk term deposits (Rs 2 crore and above) with effect from February 10. The bank slashed term deposits rates by 10-50 bps in the retail segment and 25-50 bps in the bulk segment.
On Friday, the RBI had left its repo rate unchanged at 5.15%, but said it would lend up to Rs 1 lakh crore to banks at the repo rate. This is lower than the cost of funds for most banks. Meanwhile, Bank of India cut its MCLR by 10 bps for maturities of up to 6 months. Additionally, the bank has reduced interest rates on housing loan, which will now be available from 8%.
Oriental Bank of Commerce also cut its MCLR by up to 10 bps across various tenors with effect from February 10. The bank retained its one-year MCLR at 8.15%, but reduced one-month and overnight rates by 0.10% and 0.05%, respectively, it said.
Canara Bank on Thursday had reduced its MCLR on loans and advances across all tenors. The bank has reduced interest rate by 25 bps for overnight, one month, three months and six months. And has reduced MCLR by 15 bps for one-year tenor with effect from February 7. As a result of the change, the interest rates charged for overnight and one-month loans would be 7.65%. For three-month tenor loans, the MCLR would be 7.95%; for six months 8.10% and one-year 8.20%.