HDFC Bank Cuts MCLR Rates 10 Basis Points
The Reserve Bank of India announced a 50 basis points rate cut last week, making major front-line banks cut their lending rates for faster policy transmission.
India's largest private sector lender, HDFC Bank Ltd., has lowered its marginal cost of lending rate by 10 basis points across tenures with effect from June 7 onwards, the bank's website showed.
The bank's MCLR now ranges between 8.90% and 9.10%, according to its website.
Last month, HDFC Bank had cut its MCLR by 15 basis points. Borrowers with MCLR-linked loans, which are typically home loans, are likely to see a fall in their EMIs or a shorter loan tenure, depending on their loan terms and reset periods.
That came after the Reserve Bank of India announced a 50 basis points rate cut last week, making major front-line banks cut their lending rates for faster policy transmission.
Public sector banks have also started passing on the rate cuts to their borrowers, with Bank of Baroda reducing its repo-linked lending rate by 50 basis points with effect from June 7 itself. The bank’s RLLR stands at 8.15% from 8.65%.
UCO Bank also followed suit and slashed its MCLR by 10 basis points across maturities, which will come into force from June 10 onwards. The lender's MCLR ranges in between from 8.15 to 9.00%.
However, Punjab National Bank kept its MCLR and base rate unchanged but cut its RLLR by 50 bps to 8.35%.
This has come as the RBI aims to hasten the pace of policy rate transmission. Apart from the jumbo rate cut, the central bank also reduced the cash reserve ratio by 100 basis points, which it aims to roll out in a staggered manner during the course of the year. This move is expected to release Rs 2.5 lakh crore worth of liquidity in the banking system as of December.
Reduction in CRR is designed not only to provide liquidity but also to accelerate the transmission of monetary policy rate cuts to the real economy, Governor Sanjay Malhotra had said in the post-policy conference.
Historically, transmission of policy rate changes to lending and deposit rates has taken 6-9 months. However, this time around, the RBI has observed a much faster pace, he said.
Since the 25 basis points cut in the repo rate in February, deposit rates have already fallen by an average of 27 basis points, with some banks reducing rates by up to 40 basis points.
Outstanding credit has decreased by 17 basis points, and fresh loan rates, though slower to adjust, have started to decline by about 6 basis points within just four months of the initial rate cut.
"This is a good transmission pace, much faster than previous cycles. But we want to do it even faster, which is why we have frontloaded some of our liquidity," he said.
