Bank stocks nudge higher

Bank stocks edged higher at 10:04 IST on BSE after the Reserve Bank of India yesterday, 29 March 2016, clarified some of the provisions relating to the marginal cost of funds based lending rate system which comes into effect on 1 April 2016.

Among public sector banks, Syndicate Bank (up 1.49% at Rs 64.65), Corporation Bank (up 1.86% at Rs 38.30), Indian Overseas Bank (up 1.09% at Rs 27.90), Bank of Baroda (up 0.82% at Rs 141.65), Union Bank of India (up 1% at Rs 125.85), State Bank of India (up 0.9% at Rs 191.20), Punjab National Bank (up 0.73% at Rs 82.55), Indian Bank (up 0.89% at Rs 102.40), IDBI Bank (up 0.22% at Rs 68.35) and Canara Bank (up 0.64% at Rs 181.90) edged higher.

Among private sector banks, ICICI Bank (up 2.17% at Rs 228.20), IndusInd Bank (up 1.16% at Rs 938.70), Axis Bank (up 0.97% at Rs 433.50), Yes Bank (up 0.44% at Rs 850.35) and HDFC Bank (up 0.45% at Rs 1,058) edged higher. Kotak Mahindra Bank (down 0.3% at Rs 669.25) edged lower.

Meanwhile, the S&P BSE Sensex was up 195.05 points or 0.78% at 25,095.51.

The Reserve Bank of India (RBI) clarified that fixed-rate loans of up to three years' tenor will be priced with reference to MCLR with effect from 1 April 2016. Fixed rate loans of tenor above three years will continue to be exempted from MCLR system. As regards the effective date for applying MCLR on floating rate loans, the RBI said that MCLR prevailing on the date of first disbursement, whether partial or full, will be applicable on the floating rate loan and future reset dates determined accordingly.

For computing the marginal cost of funds, commercial banks will have the option to reckon the outstanding balances of deposits and other borrowings as on any day, not more than seven calendar days, prior to the date from which the MCLR becomes effective. The chosen time lag shall be maintained consistently for a period not less one year.

The tenor of the funds in the single largest maturity bucket, provided it is more than 30% of the entire funds, will be reckoned for determining the MCLR. In cases where a bank does not have a single time bucket with more than 30% share of the funds reckoned for MCLR, the weighted average tenor of two or more maturity buckets that together account for more than 30% will be reckoned for determining the MCLR.

It may be recalled that the RBI had issued guidelines on MCLR in a circular dated 17 December 2015. The guidelines come into effect from 1 April 2016.

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