Indian Bank on Monday announced a cut its lending rates following a 0.75 percentage point reduction in the repo rate by the Reserve Bank last week. The bank has revised the different lending rates with effect from April 1, 2020, Indian Bank said in a regulatory filing. It has cut the benchmark one-year tenor marginal cost of funds based lending rate (MCLR) by 0.15 per cent to 8.10 per cent.
It is the rate against which most of the personal and consumer loans are set.
Indian Bank said this is applicable for the amalgamated entity. As the mega banks' merger kicks-in from April 1, Indian Bank will amalgamate Allahabad Bank into itself.
For other tenors in MCLR, from overnight to 6 months lending, the rates have been slashed in the range of 0.05 to 0.10 per cent.
The bank has also cut the base rate to 9.15 per cent from 9.45 per cent earlier. It is the minimum threshold below which a bank cannot lend.
Besides, the benchmark prime lending rate (BPLR) has now been brought down to 13.40 per cent from14.20 per cent.
Indian Bank said that the floating rate loans to medium enterprises will be linked to external benchmark rate (policy repo rate) with effect from April 1, 2020.
RBI had last year asked the banks to migrate to the external benchmarking for setting interest rates on loans for effective transmission of repo rates.
In a momentous and unconventional move last Friday to stave off the financial sector from the consequences of the coronavirus pandemic, RBI had brought down the key repo rate - at which it gives short term loans to banks-- to a record 4.40 per cent, down by 0.75 per cent.
It also provided the much needed liquidity support by cutting the cash reserve ratio (CRR) to 3 per cent from 4 per cent earlier.
This will free up Rs 1.37 lakh crore for the banks and financial institutions which can be used for customer lending. CRR is the percentage of deposits to be parked with the RBI in the form of cash.
Bank of Baroda and Union Bank of India also announced rate cuts earlier in the day.
The country's largest lender SBI was the first bank, after RBI move on Friday, to announce the rate cut followed by Bank of India the next day.