As per the latest report, 4 PSU banks have reduced their Marginal Cost of Fund based Lending Rate (MCLR) on 6th September, 2017. Punjab & Sind Bank lowered the overnight MCLR by 45 basis points from 8.65% to 8.15%. The one-month MCLR was reduced by 40 basis points to 8.20% and the one-year MCLR was reduced by 15 bps. MCLR refers to the minimum rate of interest below which a bank is not allowed to lend money. However, in some special cases, RBI allows banks to lend money below MCLR.
Indian Bank reduced the MCLR in all segments by 15 basis points. Vijaya Bank has cut the interest rate in two segments and its one year tenor MCLR was brought down to 8.50% which is a reduction of 15 basis points. IDBI Bank reduced MCLR by 5-10 basis points across various segments.
As per experts, the reduction in MCLR may lead to cheaper loans for borrowers. More banks may follow the suit and reduce their lending rates in the near future.