Banks cuts lending rates, home, corporate loans to be cheaper

Banks cuts lending rates, home, corporate loans to be cheaper

A day after Prime Minister Narendra Modi announced an interest subvention for home loans of up to Rs. 12 lakh and asked banks to keep the poor and middle class at the focus of their activities many PSUs and private banks reduced their benchmark lending rate by up to 1.48 percent on January 3,

2017. The reduction in lending rates may lead to an increase in credit taking frequency which has moderated substantially putting burden on balance sheet of banks. Housing, auto and corporate loans are all set to become cheaper.

iii. The three state-owned banks, State Bank of India (SBI) and Punjab National Bank (PNB) and Union Bank of India on January 1, 2017, reduced the lending rate by a good 0.9 per cent.

iv. While SBI reduced its marginal cost of funds based lending rate (MCLR) by 90 basis points for all maturities, Union Bank of India reduced its MCLR by 65-90 basis points for loans of various tenures while PNB cut its MCLRs by 70 basis points for 1, 2 and 3 year tenures.

v. Following the reduction, lending rate of SBI for a one-year loan, has come down to 8% from 8.90%.