More government-owned banks have announced linking their lending and deposit rates to the Reserve Bank of India's (RBI's) repo for facilitating faster transmission after the State Bank of India did so in May.

While Syndicate Bank has made several changes to its offerings on loans and deposit products, Bank of India, Union Bank and Allahabad Bank also said they are working on the modalities to launch similar products.

"Housing, vehicle and consumer loans will now be offered at the basis of a repo-linked rate. With the change, the housing loans will start from repo plus 2.9 per cent at 8.3 per cent," Syndicate Bank said in a statement. The saving bank deposits of over Rs 25 lakh will also be based on the repo rate, it added.

Bank of India said another dimension of rate transmission process is by way of offering repo linked lending rate to select customer segments, including personal loans. "We are working out the necessary modalities in this regard so as to launch such products during the current month," it said.

Union Bank said to provide better interest rate transmission, it will soon link its housing and vehicle loan portfolio to repo rate from the current marginal cost of funds based lending rate.

Allahabad Bank's Managing Director S S Mallikarjuna said the bank will explore the option to develop products of both assets and liabilities linked with an external benchmark to transmit the benefits of rate cut to our customers shortly.

Indian Bank too said its home and vehicle loans will be linked to the repo rate from August 15.

The move to link the deposit and lending rates by these four lenders come even as the RBI has not mandated them to do so. On August 7, the RBI cut repo rate for the fourth consecutive time this calendar year by 35 basis points to 5.4 per cent.

Repo rate is the rate at which the RBI lends money to commercial banks. A repo rate cut allows banks to reduce interest rates for consumers on loans, and lowers equal monthly instalments on home loans, car loans and personal loans.

More government-owned banks have announced linking their lending and deposit rates to the Reserve Bank of India's (RBI's) repo for facilitating faster transmission after the State Bank of India did so in May.

More government-owned banks have announced linking their lending and deposit rates to the Reserve Bank of India's (RBI's) repo for facilitating faster transmission after the State Bank of India did so in May. While Syndicate Bank has made several changes to its offerings on loans and deposit products, Bank of India, Union Bank and Allahabad Bank also said they are working on the modalities to launch similar products. "Housing, vehicle and consumer loans will now be offered at the basis of a repo-linked rate. With the change, the housing loans will start from repo plus 2.9 per cent at 8.3 per cent," Syndicate Bank said in a statement. The saving bank deposits of over Rs 25 lakh will also be based on the repo rate, it added. Bank of India said another dimension of rate transmission process is by way of offering repo linked lending rate to select customer segments, including personal loans. "We are working out the necessary modalities in this regard so as to launch such products during the current month," it said. Union Bank said to provide better interest rate transmission, it will soon link its housing and vehicle loan portfolio to repo rate from the current marginal cost of funds based lending rate. Allahabad Bank's Managing Director S S Mallikarjuna said the bank will explore the option to develop products of both assets and liabilities linked with an external benchmark to transmit the benefits of rate cut to our customers shortly. Indian Bank too said its home and vehicle loans will be linked to the repo rate from August 15. The move to link the deposit and lending rates by these four lenders come even as the RBI has not mandated them to do so. On August 7, the RBI cut repo rate for the fourth consecutive time this calendar year by 35 basis points to 5.4 per cent. Repo rate is the rate at which the RBI lends money to commercial banks. A repo rate cut allows banks to reduce interest rates for consumers on loans, and lowers equal monthly instalments on home loans, car loans and personal loans.

After State Bank of India, more PSU banks link deposit and loan rates to repo

After repeated nudging by the Reserve Bank, the nation's largest lender State Bank Tuesday followed its smaller peers to lower the lending rates by a nominal 5 basis points across all tenors, effective April 10-- its first such action since November 2017.

The new one-year marginal cost of funds-based lending rate (MCLR) is down to 8.50 per cent now from 8.55 per cent earlier, the bank said in a statement. 
This is the first reduction in MCLR by SBI, which controls and sets the pricing in the system, in over 17 months. The last time it had reduced the MCLR was in November 2017-- by 5 basis points.

The bank has also re-priced home loans up to Rs 30 lakh by 10 bps. Accordingly, interest rate on housing loans of such ticket size will now be in the range of 8.60-8.90 per cent now, down from 8.70-9 per cent.

The reduction in lending rate by the bank follows a 25 basis points cut in repo rate by the RBI in its first monetary policy review announced last week. In the February policy review also, the monetary authority had lowered the key rates by a similar quantum.

In a 4:2 majority vote, the central bank had cut repo rate to 6 per cent from 6.25 per cent earlier, citing the need to support growth that has been sluggish since many months.

It can be noted that banks have been lagging in passing on the RBI rate cuts to borrowers, citing higher credit cost due to the massive NPA piles and the resultant churn in their margins.

In February, RBI governor Shaktikanta Das had discussed with bankers the delay in transmission of policy rates. At a post-policy presser last week also, Das had complained of banks not cutting their rates, thus preventing effective transmission.

"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 said.

SBI is the third state-run lender to lower the lending rates after Indian Overseas Bank Tuesday and Bank of Maharashtra which also lowered their loan prices by 5 bps on loan tenors of one year and above, effective April 10.

While IOB said it has cut MCLR for one year loans to 8.65 per cent from 8.70 per cent earlier, BoM had on April 5, a day after the RBI action, had cut MCLR rates by 5 basis points across various tenors.

The Pune-based BoM had reduced its one-year lending to 8.70 per cent from 8.75 per cent.

Last month SBI was first to link its short-term loans and large savings deposits rates to the repo rate from May 1. For balances up to Rs 1 lakh, the savings bank rates would be 3.50 per cent, while for balances above Rs 1 lakh effective rate would be 3.25 per cent.

The bank had linked all cash credit accounts and overdrafts with limits above Rs 1 lakh to the repo rate plus a spread of 2.25 per cent.

"The benefit of the 25 bps repo rate cut by the RBI last week will get passed on in its entirety to such cash credit/overdraft customers from May 1 following this rate cut," the bank said in a statement.

The SBI counter gained 0.75 per cent at Rs 315.15 on the BSE, against a 0.62 rally in the benchmark.&nbsp;

After repeated nudging by the Reserve Bank, the nation's largest lender State Bank Tuesday followed its smaller peers to lower the lending rates by a nominal 5 basis points across all tenors, effective April 10-- its first such action since November 2017.

After repeated nudging by the Reserve Bank, the nation's largest lender State Bank Tuesday followed its smaller peers to lower the lending rates by a nominal 5 basis points across all tenors, effective April 10-- its first such action since November 2017. The new one-year marginal cost of funds-based lending rate (MCLR) is down to 8.50 per cent now from 8.55 per cent earlier, the bank said in a statement. This is the first reduction in MCLR by SBI, which controls and sets the pricing in the system, in over 17 months. The last time it had reduced the MCLR was in November 2017-- by 5 basis points. The bank has also re-priced home loans up to Rs 30 lakh by 10 bps. Accordingly, interest rate on housing loans of such ticket size will now be in the range of 8.60-8.90 per cent now, down from 8.70-9 per cent. The reduction in lending rate by the bank follows a 25 basis points cut in repo rate by the RBI in its first monetary policy review announced last week. In the February policy review also, the monetary authority had lowered the key rates by a similar quantum. In a 4:2 majority vote, the central bank had cut repo rate to 6 per cent from 6.25 per cent earlier, citing the need to support growth that has been sluggish since many months. It can be noted that banks have been lagging in passing on the RBI rate cuts to borrowers, citing higher credit cost due to the massive NPA piles and the resultant churn in their margins. In February, RBI governor Shaktikanta Das had discussed with bankers the delay in transmission of policy rates. At a post-policy presser last week also, Das had complained of banks not cutting their rates, thus preventing effective transmission. "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 said. SBI is the third state-run lender to lower the lending rates after Indian Overseas Bank Tuesday and Bank of Maharashtra which also lowered their loan prices by 5 bps on loan tenors of one year and above, effective April 10. While IOB said it has cut MCLR for one year loans to 8.65 per cent from 8.70 per cent earlier, BoM had on April 5, a day after the RBI action, had cut MCLR rates by 5 basis points across various tenors. The Pune-based BoM had reduced its one-year lending to 8.70 per cent from 8.75 per cent. Last month SBI was first to link its short-term loans and large savings deposits rates to the repo rate from May 1. For balances up to Rs 1 lakh, the savings bank rates would be 3.50 per cent, while for balances above Rs 1 lakh effective rate would be 3.25 per cent. The bank had linked all cash credit accounts and overdrafts with limits above Rs 1 lakh to the repo rate plus a spread of 2.25 per cent. "The benefit of the 25 bps repo rate cut by the RBI last week will get passed on in its entirety to such cash credit/overdraft customers from May 1 following this rate cut," the bank said in a statement. The SBI counter gained 0.75 per cent at Rs 315.15 on the BSE, against a 0.62 rally in the benchmark.

Following smaller peers, SBI cuts loan rates by marginal 5 bps

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