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

Syndicate Bank reduced its marginal cost of funds-based lending rates (MCLRs) by 25 bps across all tenures, effective August 12.
BoI, Syndicate Bank, Allahabad Bank cut lending rates by up to 25 basis points
BoI, Syndicate Bank, Allahabad Bank cut lending rates by up to 25 basis points
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More banks in the public sector came forward to announce cuts in their lending rates days after RBI cut repo rate by 35 basis points. This time, the banks to make the announcements are Bank of India, Syndicate Bank and Allahabad Bank. While BoI and Syndicate Bank have cut their marginal cost of fund-based lending rates or MCLRs by 25 basis points, Allahabad Bank has been more conservative, dropping only 15-20 bps.

Some of the changes have been linked to the tenures as well. The RBI has reduced the repo rates by 75 bps over a 4-month span from February. The Governor of RBI had clearly stated that he now expects at least the state-run banks to take the cue and bring down their lending rates. These are seen as attempts to rev up the economy. Lower interest rates and higher liquidity with the banks must result in more borrowing by those making investments in their projects and businesses.

The banks however have not been following that suggestion by the RBI Governor in letter or in spirit. The average reduction was seen to be only 29 bps against the 75 bps reduction by the RBI.

Coming back to the announcements by different banks, Bank of India has said, effective today, August 10, the MCLR for one-year tenure will be 8.35% which means a reduction of 25 basis points. Now a majority of the bank’s loan products are linked to this rate.

Syndicate Bank has cut the MCLR by 25 bps across all tenure and it comes into effect on August 12.

Allahabad Bank is following a slightly different course. The reduction seen in the one-year tenure MCLR s just 15 bps and the new rate is 8.4%. Simultaneously the term deposits in the bank across tenures in excess of one year will fetch the customers a reduced return equivalent to 10 basis points.

Meanwhile Union Bank of India is yet to make the official announcement since it held its internal meeting only yesterday. However, the bank has indicated that it would cut the rates by 15 bps and more importantly it wants to link its vehicle and home loan products directly to the repo rate.

The RBI Governor has expressed his hope that the accommodative stance of the monetary policy and its transmission will be duly taken up by all banks and the ultimate benefit to the economy will be witnessed over a period.

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