Private lender HDFC Bank has cut marginal cost of funds based lending rate (MCLR) by 10 basis points (bps) across tenures, while ICICI Bank has slashed interest rate on retail deposits up to ₹3 crore on most buckets by 10-35 bps, according to the lenders’ websites.
HDFC Bank’s MCLR now stands in the range of 8.90-9.10 per cent across overnight to 3-year tenure. ICICI Bank, meanwhile, is now offering 5.75 per cent interest rate on 271 days-1 year deposit bucket, lower 25 bps than earlier. For 18 months to 2-year period, the lender has cut deposit rate by 35 bps and now offers 6.50 per cent interest rate on this bucket. For 5 year- to 10-year period, the lender has cut deposit rate by 10 bps, offering 6.60 per cent rate of interest now on the bucket. The lender has also cut tax saver FD rate by 15 bps, offering 6.60 per cent interest rate on the scheme.
repo rate cut
The move by two largest private banks is in-line with expectations after the Reserve Bank of India (RBI) cut repo rate by 50 bps on Friday. Large public sector lenders, including Bank of Baroda, Punjab National Bank, Bank of India, and Indian Bank, have already slashed their repo-linked lending rate by 50 bps.
Banks are also likely to cut interest rate on savings bank account by up to 25-50 bps going ahead, experts say, as liquidity remains in surplus and lenders look to save their margins post revising downwards the lending rates.
To be sure, RBI Governor Sanjay Malhotra said on Friday that transmission of the repo rate cut is happening at a faster rate in the current easing cycle versus past trends. While short-term bond yields have fell by over 50 bps, on average, banks have reduced deposit rate by 27 bps, while outstanding loan rates have fallen by 17 bps and on fresh loans the interest has moderated by 6 bps.
“Going by past trends, the transmission has happened much faster...Normally, it takes 6-9 months for transmission but it’s only been 4 months since we started cutting repo in February. However, we need to do it faster and that is why we have front-loaded our actions...,” he said.