After top PSBs like Andhra Bank, State Bank of India (SBI) and Bank of Baroda (BoB) reduced their base rates, Oriental Bank of Commerce (OBC) also announced a cut in its base rate by 0.05% for existing home loan customers. This announcement makes the base rates stand at 9.45% at Oriental Bank of Commerce currently. The new rate will be effective from the 3rd of October, 2017 onwards.
According to the bank’s official statement, the base rate has been revised to 9.45% from 9.50% earlier. Yesterday itself, SBI (State Bank of India), Bank of Baroda and Andhra Bank reduced their base rates for customers. The announcements are significant since they were made just before the announcement of the monetary policy by the Reserve Bank of India and the base rate cuts by the previous three public sector banks are valid from the 1st of October, 2017.
The lowering of the base rate will be a major boon for home loan customers, who had taken their loans prior to the 1st of April, 2016. In August, 2017, Punjab National Bank (PNB) had reduced its base rate to 9.15%, which indicated a drop of 0.20%. The base rate is the minimum interest rate that a bank can charge from borrowers, the lending rate is the sum total of the base rate along with the spread over and above it.
The new lending rate came into existence from April, 2016 and is the MCLR or marginal cost based lending rate. This system is tied to actual deposit rates and can be reset across varying time periods. All home loans taken after the 1st of April, 2016 are tied to the MCLR. Currently, the MCLR rates are lower in comparison to base rates. Customers who are tied to the base rate can always switch their loans to the MCLR system but several customers have not switched yet.
The base rate for the State Bank of India now stands at 8.95% as compared to 9% while it is 9.50% for Andhra Bank in comparison to 9.77% previously. For Bank of Baroda, the base rate is now 9.15% as compared to 9.50% earlier.