State Bank of India (SBI) and ICICI Bank – the two large banks of the country - decided to reduce its lending rates across various tenures to push loan growth amid the festive season.
SBI – the largest lender – reduced its marginal cost of funding based lending rate (MCLR) by 15 bps while ICICI Bank reduced it by 10 bps across various loan tenures.
All loans including home and auto loan are linked to MCLR. Both the banks said the new rate will come into effect from 1 November.
For SBI, the one year MCLR will be 8.90 per cent while for ICICI Bank it will be 8.95 per cent. Retail loans like home and auto loans are linked to the one year MCLR.
“Market rates have fallen after the central bank’s rate cut. The move was aimed to facilitate monetary transmission,” a top SBI official told The Hindu.
RBI has reduced the benchmark interest rate or the repo rate by 25 bps earlier this month to 6.25 per cent as retail inflation slowed.
MCRL – the new loan pricing regime came into effect from the beginning of the current financial year. The move was aimed to facilitate monetary transmission.
However, the banks have not cut their base rate – the erstwhile loan pricing regime. All the loans taken before 1 April, 2016 are linked to base rate.
The central bank, in several communications, had highlighted the need for improving monetary transmission so that credit flows to the productive sectors.
