With the new marginal cost of funds based lending regime kicking in, a
host of banks, including ICICI Bank, Bank of India, IDBI Bank and Axis
Bank, announced new lending rates on Friday April 01,2016
On Thursday, seven banks, including State Bank of India, HDFC Bank, Bank
of Baroda, and Canara Bank, announced their lending rates.
The one-year
benchmark lending rates of these banks range from 9.20 per cent to 9.85
per cent, about 10 basis points lower than their current base rates (or
the minimum lending rates).
In the case of banks (barring Kotak
Mahindra Bank and Axis Bank) that announced the one-year benchmark
lending rates on Friday, the rates ranged from 9.20 per cent to 9.65 per
cent, about 5 to 65 basis points lower than their base rate.
In the case of Kotak Mahindra Bank, the MCLR at 9.60 per cent is a tad
higher than the base rate of 9.50 per cent. As for Axis Bank, the MCLR
and base rate are the same at 9.50 per cent.
New loans, including home, auto and corporate loans, are expected to
become cheaper by about 10 basis points following the introduction of
the new lending rate regime, whereby all rupee loans sanctioned and
credit limits renewed with effect from April 1 will be priced with
reference to the marginal cost of funds based lending rate (MCLR).
Banks will review and publish their MCLR of different maturities —
overnight, one month, three months, six months, one year — every month
on a pre-announced date. In addition to these maturities, banks have the
option of publishing MCLR of any other longer maturity.
Apart from helping improve the transmission of policy rates into the
lending rates of banks, the MCLR is expected to improve transparency in
the methodology followed by banks for determining interest rates on
advances.
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