As of now, the one year MCLR stands at 8.40 per cent.
The reduced rates would come into effect from September 10, 2017, Bank of India said.
Among others, the overnight and 1-month MCLR have been cut by 0.10 per cent each to 7.90 per cent and 8 per cent, respectively.
However, a majority of them still follow the base rate or the minimum lending rate formula to charge interest on loans.
MCLR, which is changed every month, is a uniform methodology, which was introduced to ensure fair interest rates to borrowers as well as banks.
The Reserve Bank in its last monetary policy in August had said it would review the MCLR method as banks were not passing on the benefit of repo rate reduction to consumer.
A new market-linked benchmark rate is being worked out for a better rate transmission, Deputy Governor Viral Acharya had said.
Shares of Bank of India closed 0.87 per cent up at Rs 144.30 on BSE.