Money & Banking

Dena Bank lowers MCLR by 5 bps to 9.4%

| Updated on: Nov 01, 2016

State-owned Dena Bank today joined its larger rivals by lowering its marginal cost of funding-based lending rate (MCLR) by 5 bps to 9.4 per cent.

Under the revised rates, the one-year MCLR has been fixed at 9.40 per cent, while the most competitive overnight MCLR is 9.15 per cent, the Ahmedabad-based bank said in a statement. The revised rates will be applicable from today.

The announcement follows similar moves by State Bank and ICICI Bank that lowered their MCLR by 0.15 per cent and 0.10 per cent, respectively, over the weekend. This series of action signalled a dip in borrowing costs ahead of the busy credit season.

The announcements come after repeated displeasure shown by RBI for not passing on the benefit of its policy rate cuts to borrowers, which is expected to give a boost to the sagging economic growth.

They also come ahead of the crucial “busy season” in the second half of the fiscal that sees a spurt in loan demand.

Industrial credit growth in the first half of the year was a historic low of just 0.3 per cent.

The MCLR was introduced this April as a transparent and effective alternative by RBI after banks showed reluctance in passing on the benefits of rate cuts to borrowers.

Even after the MCLR introduction, RBI continues to be concerned on the issue of transmission which was flagged by Governor Urjit Patel at his maiden policy review last month.

Banks are given a set formula to compute the MCLR based on the cost of funds and are required to review it on a monthly basis, when the calls on the new rate structures are taken.

Published on January 15, 2018

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