A day after the Reserve Bank of India reduced the benchmark repo rate by 25 basis points, state-run Bank of Maharashtra announced a nominal 5 bps reduction in its lending rates across various tenors.
In a 4:2 majority vote, the central bank had cut the repo rate to 6 percent from 6.25 percent citing the need to support growth that has lost momentum of late in the first bi-monthly monetary policy announced on Thursday.
The central bank also lowered its gross domestic product forecast for FY20 to 7.2 from 7.4 percent projected in the February review while also lowered its inflation forecast to 2.9 to 3.8 percent for the year.
The Pune-based Bank of Maharashtra reduced its one-year marginal cost of funds-based lending rate to which most of the bank lending rates are linked, to 8.70 percent from 8.75 percent. The six-month, three-month and one-month MCLR have also been revised downwards to 8.50 percent, 8.45 percent, and 8.25 percent, respectively.
The lender left its base rate unchanged at 9.50 percent, though. It can be noted that after the February rate cut, Bank of Maharashtra was the first lender to announce a nominal 5 bps reduction in the pricing of its six months products.
While talking to the reporters after the policy announcement, RBI governor Shaktikanta Das had said despite two consecutive rate cuts by the monetary authority, appropriate and effective transmission is still missing.
"After the last meeting I had held with banks some of them have marginally (up to 5-10 bps) cut their MCLR, but they need to do more," he had told reporters post the policy announcement Thursday.
Das said credit flows to micro and small as well as medium industries have remained tepid, though they improved for large industries.
"While bank credit is growing at 14.3 percent it is not a broad-based. Bank credit to micro and small industries, which are critical to employment and exports, was flat at 0.6 per cent and also credit to medium industries at 0.7 percent," he had said.
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