After the RBI Repo decrease, several large banks cut their lending rates
Following the Reserve Bank of India’s (RBI) recent move to lower the repo rate by 50 basis points, a number of large banks, notably Punjab National Bank (PNB), Bank of India, and UCO Bank, have drastically reduced their lending rates.
The rate reduction is a component of the RBI’s plan to boost economic expansion by lowering borrowing costs for both individuals and companies.
One of the first banks to pass the benefit on was Punjab National Bank, which reduced its repo-linked lending rate from 8.85% to 8.35%.
However, the bank maintained its marginal cost of lending rate (MCLR) and base rate at the same levels.
A similar cut was made by Bank of India, which lowered its repo-based lending rate from 8.85% to 8.35%, as per its stock exchange filing.
In contrast, UCO Bank reduced its MCLR by 10 basis points for all loan terms. The modifications, which take effect on June 10, will marginally lower the cost of a number of loan kinds, including personal and house loans.
The overnight, one-month, and three-month MCLRs were all lowered by the bank from 8.25 percent to 8.15 percent, 8.45 percent to 8.35 percent, and 8.6 percent to 8.5 percent, respectively.
The MCLRs for six months and a year were reduced to 8.8% and 9%, respectively.
Adding to the list of banks lowering borrowing costs, Bank of Baroda also announced a 50 basis point drop in its repo-linked lending rates for a few loan tenures.
These rate reductions follow the RBI’s announcement to lower the repo rate, a crucial policy rate at which the RBI loans to commercial banks, by the Monetary Policy Committee, which is chaired by Governor Sanjay Malhotra.
By making loans more affordable, the rate drop aims to stimulate the economy by promoting investment and expenditure.
Along with lowering the repo rate, the RBI also lowered the Cash Reserve Ratio (CRR) from 4% to 3%, a 100 basis point decrease.
It is anticipated that this cut, which will be implemented in four stages, will provide the banking system with an additional Rs 2.5 lakh crore in liquidity.
Reducing the CRR, which is the percentage of bank deposits that must be kept with the RBI, enables banks to extend more credit.