The Finance Ministry has examined bank interest rates before and after April 1 and has found that loan pricing under the new marginal cost of funds-based lending rate (MCLR) is on the lower side.

“Banks have begun lowering rates through the MCLR regime that started on April 1. Consumers and new borrowers are finally beginning to get some benefit,” said a senior government official.

Banks were expected to cut lending rates after the Reserve Bank of India reduced the repo rate by 25 basis points in its first bi-monthly monetary policy for 2016-17 and the Finance Ministry had also reset the return on small savings.

The Finance Ministry is confident that banks will lower rates further in the coming months and the new lending rate regime will also ensure quicker monetary policy transmission.

The Department of Financial Services is keeping an eye on the lending and deposit rates of banks.

For instance, the base rate for Allahabad Bank was 9.7 per cent on March 31, but on April 1, its overnight MCLR was 9.3 per cent, the one-month rate 9.35 per cent and the one-year MCLR 9.6 per cent, said the official.

Similarly, in the case of State Bank of India, the base rate was 9.3 per cent but the overnight MCLR was 8.95 per cent and the one-year MCLR, 9.2 per cent.

Economic Affairs Secretary Shaktikanta Das too had recently stressed that the government expects banks to effectively transmit rates to customers and had expressed hope that they would further lower rates in the coming days.

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