Banks cut base rates; home loans to be cheaper

Housing, auto and corporate loans are all set to become cheaper, with half a dozen PSU and private banks, announcing steep reductions in their benchmark lending rates by up to 1.48%, after a spurt in deposits following demonetisation

Taking a cue from State Bank of India, other lenders including India’s largest private sector lender ICICI Bank and state-owned Oriental Bank of Commerce and Andhra Bank, have announced cuts in their marginal cost of funds-based lending rates (MCLR).

SBI, on January 1, 2017, reduced its lending rate by a good 0.9% after prime minister Narendra Modi in his new year eve address, urged the banks to focus on the needs of poor and lower middle-class and middle-class.

Following the reduction, lending rate of SBI for a one-year loan, has come down to 8% from 8.90%.

SBI’s move, was quickly followed by PNB and Union Bank of India, who also slashed lending rates by up to 0.9%.

See also: Home loan rate cut and sops: Immediate cheer but can it revive the sector?

The reduction in lending rates, may prompt increase in credit offtake, which has moderated substantially putting burden on the balance sheet of banks.

Home loan rates for ICICI Bank will come down between 0.45% and 0.6%, depending on quantum and category. Another private sector lender, Kotak Mahindra Bank, too reduced the MCLR rate by up to 0.45%. The bank has reduced MCLR by 0.20% to 9% from 9.20% for one-year tenor, Kotak Mahindra Bank said in a statement. However, the MCLR for the three-month period has been reduced by 0.45 percentage points to 8.40%, while the lending rate for two and three years, has been brought down to 9% from 9.25%.

As far as the youngest player, Bandhan Bank is concerned, it has cut its MCLR by 1.48%, to 10.52%, effective from January 3, 2017. With this, the bank has cut its loan rate for small borrowers by almost 4 percentage points, since it started operations in August 2015, Bandhan Bank said in a statement.

Oriental Bank of Commerce has reduced the one-year MCLR rate by 0.8% to 8.60%, while Andhra Bank has brought it down by a similar percentage point to 8.65%, effective January 3, 2017. Dena bank has reduced the MCLR by 0.75%, to 8.55%, for 1 year tenor, the bank said in a statement.

 

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