Published: Mon, January 02, 2017
Economy | By Melissa Porter

PNB reduces MCLR by 70 bps with effect from Jan 1

PNB reduces MCLR by 70 bps with effect from Jan 1

IDBI Bank and State Bank of Travancore on Friday reduced their MCLR by 15 bps and 30 bps respectively.

"The bank has reduced marginal cost of funds-based lending rate (MCLR) by 0.9% from 8.90% to 8% for one-year tenure", SBI said. Borrowers of IDBI bank seeking three-year loans will be charged 9.30%, down 40 bps; while six month loans have been pegged at 8.90%, down 35 bps.

The new loans rates will be effective from January 1.

Taking a cue from the SBI, Punjab National Bank has cut its one-year MCLR rate by 0.7 per cent to 8.45 per cent from 9.15 per cent, effective today. The bank has reduced its benchmark lending rate by 200 basis points in the past two year. Delhi-based PNB will charge 8.45 per cent for a year while Union Bank will charge 8.65 per cent. In the past, banks have typically lowered lending rates by increments of 5 to 10 basis points as they transmitted monetary policy or the cost of funding dropped. The reduction comes in the wake of banks flush with deposits post demonetisation. Other banks are expected to follow suit in the coming days.

SBI also lends to housing finance companies.

"It is vision of PM @narendramodi, which is rooted in concern for the poor and under privileged, that such a move has been possible", he wrote.

"The decision is prompted by liquidity", SBI chairman Arundhati Bhattacharya told The Hindu. It is fairly evident that the government is serious about comprehensive inclusion. "We have a lot of deposits in low-priced accounts. The government's commitment to a less cash society will also aid in reforming the tax structure for the better".

That had raised expectations banks would cut lending rates to boost credit growth and spark a revival in private investments. Credit growth is very muted.

The Reserve Bank had revised downward the growth for 2016-17 to 7.1 per cent from 7.6 per cent, with evenly balanced risks, due to demonetisation.

"History is witness that the Indian banking system has never received such a large amount of money in such a short time", Modi said in his December 31address to the nation.

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