Union Bank cuts loan rates for medium enterprises up to 375 bps

New rate effective today, will be 12.25-13.75% range; base rate unchanged, spread narrowed

State-run lender Union Bank of India has reduced the lending rates for micro, small and medium enterprises (MSMEs) by 200 basis points (bps) to 3,765 bps to boost demand. The new rate, which came into effect on Wednesday, will be in the 12.25-13.75 per cent range.

While the bank has decided to keep its base rate unchanged at 10.25 per cent, it has reduced the spread it charged for advances extended to MSMEs. The base rate is the benchmark rate to which all loan rates are linked.

While Union Bank’s overall loan growth was sluggish at 9.4 per cent year-on-year as of end-September, the growth in the MSME segment was 31.6 per cent. “The interest rate cut in the MSME segment is expected to boost the demand from the manufacturing sector which is essential for the Make In India vision of the government,” said Arun Tiwari, chairman and managing director of the bank.

The bank has identified three sectors - retail, agriculture and MSME - to boost its loan growth. The current loan growth in retail and agriculture sector is 28.5 per cent.