Several public sector lenders, including the State Bank of India (SBI), Bank of Baroda (BoB) and Indian Overseas Bank (IOB), have reduced their marginal cost of funds-based lending rates (MCLR) by up to 35 basis points (bps) across several loan categories.

The lowering of lending rates follows the RBI-led monetary policy committee’s reduction in repo rate since February by 100 bps to 5.50%. Banks have adjusted their repo-linked external benchmark-based lending rates downward by a similar margin. The one-year median MCLR has also moderated.

State Bank of India

SBI, the country’s largest lender, reduced its MCLR by 5 bps points across tenors, effective 15 August. 

After the revision, the overnight MCLR and one-month MCLR stand at 7.90%, compared to 7.95% earlier. 

The one-year MCLR, which is a key benchmark for retail loans, has been reduced to 8.75% from 8.80%. The two-year MCLR has been fixed at 8.80%, down from 8.85% earlier. Similarly, the three-year MCLR has been brought down to 8.85% from the earlier 8.90%.

The three-month and six-month MCLR remain unchanged at 8.05% and 8.45%, respectively. 

Bank of Baroda

Bank of Baroda has revised its lending rates, effective 12 August.

The state-owned bank lowered its one-month MCLR by 35 bps to 7.95% from 8.30%. The overnight MCLR now stands reduced by 15 bps to 8.05% from 8.20% earlier.

The three-month MCLR has also been lowered by 15 bps, from 8.45% to 8.30%. Similarly, the six-month MCLR has been reduced to 8.65% from the earlier 8.75%. The one-year MCLR has been set at 8.80%, down from 8.90%.

Indian Overseas Bank

Chennai-headquartered Indian Overseas Bank has reduced its MCLR by 10 bps across all tenors. IOB’s one-year and six-month MCLR have been revised to 8.90% and 8.70%, respectively. The bank is now offering an interest rate of 8.30% on one-month MCLR, and 8.45% on three-month MCLR.

 Following the change, the overnight MCLR is 8.20%, down from 8.30%. 

Bank of India revised its one-year MCLR by 10 bps to 8.9%, effective from 1 August.

MCLR, introduced on 1 April 2016, is the minimum interest rate below which banks and non-banking finance companies (NBFCs) cannot lend. 

The RBI also in October 2019 introduced the external benchmark-based lending rate (EBLR), linked to the repo rate. Since any change in repo rate gets immediately reflected in loans linked to EBLR, it strengthens monetary policy transmission. All retail loans and floating rate loans to MSMEs (micro, small and medium enterprises) are now linked to EBLR.