NEW DELHI, CHENNAI: Consumer loans became cheaper on Friday with banks moving to a new way of setting lending rates following RBI's diktat to ensure faster and effective transmission of its policy rate cuts to borrowers. A number of banks, including ICICI, Bank of India, IDBI, Indian Bank joined their peers like SBI, HDFC Bank and Axis Bank to implement Marginal Cost of Funds-based Lending Rate (MCLR).
The asset-liability committee (ALCO) of Indian Bank, in a meeting in Chennai on Friday, approved the new MCLR. These rates will be applicable for all the loan sanctions and renewal w.e.f April 1, 2016. The bank has fixed 9.25% MCLR for one month loan, 9.3% for three months, 9.35% for six months, 9.45% for one-year loan loan, 9.55% for three years and 9.7% for five-year tenor.
ICICI Bank, in a statement, said that it has fixed lending rate of 9.10% for three-month loan, 9.15% for six months and 9.20% for one year loan. The base rate or the minimum lending rate of ICICI Bank is 9.35%.
Similarly, after implementing MCLR, Kotak Mahindra pegged lending rate at 9.60% for one-year loan and for 3 years at 9.65%. Kotak Mahindra Bank has fixed its base rate at 9.50%.
Oriental Bank of Commerce, Dena Bank and Andhra Bank pegged lending rate of 9.45% for 3-month loan, 9.50% for 6 months and 9.60% for one year loan.
Similarly, IDBI Bank fixed interest rate on one year loan at 9.45%, 9.75% on two years loan and 9.90% for three years loan.
Banking major SBI, HDFC Bank, Axis Bank, among others on Thursday said that they would move to new methodology for setting lending rates from April 1.
RBI had asked banks to price fixed rate loans of up to three years based on marginal cost of funds from April 1. The lending rate based on marginal cost of funds is lower than base rate in some cases resulting in lower EMIs for borrowers.
Now, Focus Shifts to RBI
Loans may become more cheaper if RBI cuts policy rate next week as widely expected. RBI is scheduled to announce first bi-monthly monetary olicy on April 5.