The Union Bank of India, one of the renowned public sector banks in India, has announced a reduction in its marginal cost of funds-based lending rate (MCLR) by 10 basis points. This reduction is applicable to interest rates of all tenors. Following this reduction, the bank’s one-year MCLR now stands at 8.60% compared to the earlier rate of 8.70%. This reduction is effective from March 1, 2019.
The bank stated that this reduction in MCLR is in response to the measures announced by the Reserve Bank of India (RBI) to revive the economy. In early February, RBI reduced its repo rate by 25 basis points. The bank’s six-month MCLR is now 8.50% and the two-year MCLR is now 8.70%.
The base rate of Union Bank of India was also reduced from 9.10% to 9%. Following the rate cut by the RBI, banks have been reducing their MCLR to pass on the benefit to customers.
Kotak Mahindra Bank announced a 5-basis point reduction in its MCLR, which now stands at 9%. India’s second largest public sector lender Punjab National Bank announced a 10-basis point reduction in its MCLR. Its one-year MCLR now stands at 8.45%.
The State Bank of India (SBI) has announced a reduction in its home loan rates by 5 basis points. Most consumer loans offered by banks are benchmarked against the one-year MCLR. Any reduction in this rate will result in a reduction in interest rates for various types of loans.
Union Bank of India also received a significant capital infusion from the government in its recent recapitalisation drive of public sector banks in the country. Union Bank of India received Rs.4,112 crore from the government, and this additional funding will be used to boost credit growth in the bank.