Leading public sector lender Bank of India has lowered its MCLR rates for diverse tenors starting from the 10th of September, 2017. Rates have gone down by 0.05-0.10%. The bank’s statement confirmed this reduction in MCLRs (marginal cost based lending rates). The revised marginal cost based lending rate for a year is now 8.30% according to the official statement. The one-year MCLR was previously 8.40%.
The lowered rates will be applicable from the 10th of September, 2017 onwards according to Bank of India. The 1-month and overnight MCLR have been reduced by 0.10% each and they stand at 8% and 7.90% respectively. Loans with 3-month tenors will have 8.10% in terms of interest rates, which is a drop of 0.05% from the present MCLR. The 6-month MCLR remains unchanged at 8.25%. The MCLR system was adopted by Indian banks from April, 2016 after the guidelines were issued by the Reserve Bank of India (RBI).
However, a large number of loans are still linked to the minimum lending rate formula or base rate for charging loan interest. MCLR is charged on a monthly basis and is a uniform system, which was introduced for guaranteeing fair interest rates for banks and borrowers alike. The RBI has already stated last month that the MCLR method will again be reviewed since many banks were not passing on the benefits arising from reductions in the repo rate to customers.
A new market-tied benchmark rate is being worked on for superior transmission of rates according to Viral Acharya, the Deputy Governor at the RBI.