Indian Bank cuts 1-year MCLR by 5 bps to 7.3%; effective from September 3

State-owned lender Indian Bank on Tuesday announced a cut of 5 basis points in its marginal cost of funds based lending rate (MCLR) for one-year tenure.

The bank has decided to reduce the MCLR for one-year tenure by 5 basis points to 7.30 per cent effective from September 3, 2020, Indian Bank said in a regulatory filing.

Most of the consumer loans such as personal, auto and home were priced on the basis of the one-year MCLR prior to the introduction of repo-linked lending rate (RLLR).

All new retail loans (housing, education, vehicle), credit to MSMEs are linked to RLLR now.

From October last year, the Reserve Bank of India (RBI) had mandated banks to link all new floating rate personal or retail loans and floating rate loans to MSMEs to an external benchmark.

The RBI allowed banks to link their interest rates to repo rate or three-month or six-month treasury bill.

On Monday, the country's second largest lender Punjab National Bank (PNB) had raised its RLLR by 15 basis points to 6.80 per cent, making loans costlier for new borrowers.

However, PNB had slashed its base rate by 10 basis points to 8.80 per cent from 8.90 per cent.

The revised lending rates will be effective from September 1, 2020, it had said.