Axis Bank cuts rate by up to 70 bps

The new rates are effective from January 18

The country’s third biggest private sector lender Axis Bank on Friday cut its interest offering by up to 0.70 per cent, following similar moves by all the major players in the system due to high liquidity after demonetisation.

The Shikha Sharma-led bank cut its marginal cost of funds based lending rate (MCLR) for one year — which serves as the benchmark for a slew of loans including home loans — by 0.65 per cent to 8.25 per cent, it said in a statement.

The new rates, decided by the bank’s asset liability committee which met Friday, are effective from January 18.

“We have passed the entire benefit accruing from a surge in the current and savings account and a drop in deposit rates to the borrowers,” its head of treasury Shashikant Rathi said. He added that the bank had effected a cut of between 0.75-1 per cent in its deposit offerings right after the November 8 government announcement to scrap ~ 500 and ~1,000 notes, which has led to a surge in the low-cost current and saving account deposits.

When asked about his outlook, Rathi said there is no more room for a cut at present and any further action hinges on events like a cut by RBI in its key rates or a surge in low-cost deposits. The bank had also cut its base rate by over 0.10 per cent earlier this month. MCLR replaced the base rate in April last year for a better transmission of the RBI’s policy actions in borrower costs.

He said 30 per cent of the bank’s loan book is on the MCLR-based system, but the number is very dynamic as more people are switching to the lower-priced MCLR rates at a faster pace.