Four PSU banks follow RBI cue, cut base lending rates

Four public sector lenders, including Bank of India and Syndicate Bank, announced their new marginal cost of funds based (MCLR) lending rates, a day after RBI cut repo rate by 0.25 per cent

Bank of India said it has fixed marginal cost of funds based lending rate (MCLR) at 9-9.35 percent with effect from October 7. For overnight tenor, the rate will be 9 per cent, 9.2 per cent for three months, 9.25 per cent for six months and 9.35 per cent for one year, it said in a regulatory filing.

Syndicate Bank's MCLR will be in range of 9.3 - 9.45 per cent with effect from 7 October, while that of Bank of Maharashtra  will be between 9.05-9.6 per cent from 1 October. Delhi-based Punjab & Sind Bank said its lending rates will be in the range of 9.3-9.75 per cent from 5 October.

The country's largest bank, State Bank of India, and the second largest lender, ICICI Bank, reduced rates by 5 bps to 9.05 per cent for one year with effect from 1 October.

The Reserve Bank of India on Tuesday lowered the repo rate - policy rate at which it lends to banks – by 25 basis points to 6.25 per cent.

From April of this year the RBI has asked banks to arrive at lending rates based on MCLR formula wherein the rates are reset in frequent intervals ranging from one month to three years.

Meanwhile, the RBI has said that it will review the MCLR mechanism of arriving at lending rates.

Bank's move to marginally cut base lending rates come after RBI governor Urjit Patel expressed disappointment over slow transmission of a cut in policy rates to lending rates. ''The transmission of lending rates to bank borrowers has been less than what anyone of us would have liked it to be,'' he said soon after announcing policy.