United Bank Of India Cuts Lending Rate

New Delhi: United Bank of India reduced its benchmark lending rate by up to 0.90 per cent, joining others such as State Bank of India, ICICI Bank, HDFC Bank and Punjab National Bank.

The public sector bank's asset liability committee revised downwards the marginal cost of funds-based lending rate (MCLR) by 0.60-0.90 per cent across different tenures with effect from January 6.

The rate for one-year tenure has been reduced by 0.60 per cent to 8.8 per cent, the bank said in a filing to the BSE on Thursday.

With the reduction in benchmark rate, home, car and other loans linked to MCLR will also become cheaper. The one-month lending rate has been cut by 0.90 per cent to 0.90 per cent.

On Wednesday, the country's second biggest private sector lender HDFC Bank cut its benchmark lending rate by up to 0.90 per cent.

Earlier this week, State Bank of India - the country's largest lender, along with PNB and Union Bank of India, went in for similar reductions by up to 0.9 per cent.

The one-month lending rate has been cut by 0.90 per cent to 8.35 per cent.

Following demonetisation, banks are flooded with deposits that have brought down their cost of funds, which explains the latest bout of lowering of rates.

After the Reserve Bank of India's prodding, banks switched to MCLR as their new benchmark lending rate from June last year, replacing the base rate system for new borrowers. It is calculated on the marginal cost of borrowing and return on net worth for banks.

It was introduced by the RBI to ensure fair interest rates for borrowers as well as banks.

MCLR also seeks to address the regulator's primary objective of expediting monetary policy transmission along with augmenting uniformity and transparency in the calculation methodology of lending rates.

MCLR rates are revised every month.