BoI, Syndicate Bank, Allahabad Bank cut MCLRs by up to 25 basis points

BoI, Syndicate Bank, Allahabad Bank, MCLRs, Bank of India, Reserve Bank of India, market news

Syndicate Bank reduced MCLRs by 25 bps across all tenures, effective August 12.

State-owned lenders Bank of India, Syndicate Bank and Allahabad Bank on Friday reduced their marginal cost of funds-based lending rates (MCLRs), days after a 35 basis-point (bps) cut in the repo rate by the Reserve Bank of India (RBI) at its August policy.

The one-year MCLR at Bank of India (BoI), to which over 80% of the bank’s loan book is linked, will come down by 25 bps to 8.35% per annum with effect from August 10. The MCLRs for other tenures at the bank remained unchanged.

Syndicate Bank reduced MCLRs by 25 bps across all tenures, effective August 12. The bank’s one-year MCLR is now down to 8.35%. Allahabad Bank’s rate reductions ranged between 15 bps and 20 bps, effective August 14. The bank cut the one-year MCLR by 15 bps to 8.4%. Simultaneously, the bank reduced the rate of interest on retail term deposits by 10 bps across all maturities of over one year.

Union Bank of India, which held its asset liability committee (ALCO) meeting on Friday, said it expects to further soften its MCLRs by up to 15 bps, over and above the 30 bps cuts it has made since February 2019. In order to facilitate better interest rate transmission, it will soon link its housing and vehicle loan portfolio to the repo rate, the lender said.

The lowering of rates at these lenders follows reductions by State Bank of India (SBI), HDFC Bank, Bank of Baroda (BoB) and IDBI Bank over the last few days. The one-year MCLR at SBI now stands at 8.25%, while for HDFC Bank and BoB, they are 8.6% and 8.45%, respectively.

Transmission of monetary policy continues to be a sticky point between banks and the regulator. Despite a cumulative 75 basis points (bps) cut in the repo rate between February and June this year, banks have reduced their weighted average lending rates (WALR) on fresh rupee loans by a mere 29 bps during the same period, RBI governor Shaktikanta Das said on Wednesday.

“These policy impulses (rate cuts and the accommodative stance of monetary policy) have been transmitted through financial markets fully. The weighted average call money rate (WACR) has declined by 78 bps, market repo rate by 73 bps and 10-year benchmark g-sec yield by 102 bps,” Das explained. “Banks, on the other hand, have reduced their interest rates on fresh rupee loans by 29 basis points so far (February-June 2019). Our interactions with various stakeholders, including both public sector and private sector banks, indicate that steps are being taken by them on an ongoing basis to progressively lower their interest rates so that the benefits of the policy rate reductions are passed on to the economy.”

Accordingly, RBI expects higher transmission of monetary policy actions and stance by the banks in the weeks and months ahead, he added.