Axis cuts base rate by 10 bps

These new rates will be effective from July 27

Axis Bank, the country’s third-largest private sector lender, has cut its base rate by 10 basis points to 9.35 per cent, bringing its minimum lending rate on a par with that of ICICI Bank, but still to catch up with the country’s largest lender, State Bank of India, and HDFC Bank, that have base rates of 9.30 per cent each.

Axis Bank’s competitors had reduced their base rates in October last year.

Axis Bank’s last base rate cut was in April, when it had reduced the rate by five basis points to 9.45 per cent. The bank’s latest base-rate revision will be effective from July 27 (Wednesday). The lender stated that as a result, the effective rate applicable to various fund-based credit and credit limits which are linked to the bank’s base rate will be reduced by 10 basis points.

While replaced by marginal cost-based lending rate (MCLR), base rate is still the benchmark for most old customers of banks and, therefore, a reduction in the base rate brings down the rates on loans pegged to the base rate, for example, home loan rate.

Commercial banks moved to the new loan pricing regime from April 1. The Reserve Bank of India prescribed banks to move to the MCLR system to improve transmission of monetary policy. Instead of one benchmark rate, banks would indicate at least five benchmark rates varying according to tenures. The MCLR has to be reviewed every month.

On 15 July, Axis had reduced its MCLR by five-10 basis points across various maturities.

The bank’s current MCLR stands at 8.90-9.45 per cent for various maturity profiles between overnight and three years.