IDBI Bank on Monday reduced the marginal cost of funds based lending rate (MCLR) for overnight, one-month, three-month and six-month tenors by 5 basis points (bps) to 7.95 per cent, 8.25 per cent, 8.45 per cent and 8.65 per cent, respectively, according to the lender’s website.
IDBI Bank’s overall advances fell by 16.8 per cent year-on-year (y-o-y) to nearly Rs 1,525 crore as of December 2018.
In a recent development, SBI has responded to the RBI’s desire for products which have faster transmission of rates by selectively introducing repo-linked savings and cash credit products, said analysts at KIE. From May 1, 2019, all SBI savings deposits above Rs 1 lakh would be priced at 275 bps below the prevailing repo rate of 6.25 per cent, which implies interest on savings accounts unchanged at 3.5 per cent.
While the cash credit loans of over Rs 1 lakh would be 225 bps in excess of the repo rate, which implies 8 per cent rate of interest compared to MCLR at 8.55 per cent, said the experts at KIE. “Linking the savings deposit rate with policy rate will help faster repricing of liabilities for banks and help in protecting their profit margins,” said Anil Gupta, V-P, Icra. More banks, especially all the PSBs and a few large private banks, are expected to follow the move by linking their deposit and lending rates to RBI’s repo rate, Gupta added.
Earlier this month, HDFC Bank had also reduced the MCLR for two and three years tenors by 5 bps to 8.85 per cent and 9 per cent, respectively, after back-to-back rate hikes in December and January.
“HDFC Bank has been consistently gaining market share across retail product segments, including personal loans and auto loans. Strong capitalisation and liquidity levels should enable the bank to sustain this growth momentum over the next few years,” said analysts at Motilal Oswal. —FE