Hours after State Bank of India reduced its marginal cost of funds-based lending rate (MCLR) by 25 basis points (bps), HDFC Bank followed the footsteps of the public lender and reduced its MCLR by 5 basis points (bps) across tenors.
The move comes amid similar steps taken by the peers after two rate cuts by the Reserve Bank of India (RBI) in order to help the economic growth in wake of the COVID-19 pandemic. The RBI has cut its key rates by 115 bps since March.
The latest rate cut is effective from Monday (June 8), according to bank’s website.
One-year MCLR, to which many of the consumer loans are tied, will now be 7.65 per cent, while three-year MCLR has been set at 7.85 per cent.
HDFC Bank said its overnight MCLR stands reduced to 7.30 per cent, while one-month MCLR is 7.35 per cent.
Earlier in the day, SBI announced its second cut in its lending rate in a month, making loans linked with the MCLR cheaper. The bank had reduced MCLR by 25 bps across all tenors, with effect from June 10, 2020.
Banks review their MCLR every month. Lately, some part of the lending has also been linked directly to external benchmarks, such as the repo rate, for a better transmission of policy actions.