Four PSU lenders have slashed their lending rates. The list of lenders include banks like Vijaya Bank and Indian Bank. They have reduced their lending rates to as much as 45 basis points or 0.45%. This would result in cheaper loans home, car and other loans as well.
Punjab & Sind Bank have decreased their marginal cost of funds based lending rate (MCLR) by 45 basis points to 8.15% while the Chennai based bank, Indian Bank reduced the MCLR across all segments by 15 basis points. Vijaya bank reduced their interests as well across numerous segments by 15 basis points to 8.50%. IDBI bank also made the list by reducing their MCLR by 5-10 basis points for various sectors.
The drop in lending rates is expected to be a huge factor in loan growth, which will then in turn impact the economy positively.
Banks have shifted from the base rate system to MCLR as their standard lending rate from June of last year. Introduced by the RBI to safeguard the borrowers and banks with reasonable interest rates, MCLR is calculated on the marginal cost of borrowing and the return that a bank makes on net worth.
MCLR also pursues to address the objective of accelerating financial policy transmission and supplementing it with transparency and uniformity in the calculation procedure of lending rates. These rates are usually revised on a monthly basis.