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Union Bank of India and Bank of Maharashtra on Tuesday introduced repo rate linked floating rate loans for the retail and micro & small enterprise (MSME) segments.
Union Bank, in a statement, said it has fixed the External Benchmark Lending Rate (EBLR), which is linked to the repo rate, at 8.25 per cent as on October 1, 2019. The effective rates for various schemes will be at EBLR plus premium for the product, it added.
"With EBLR linked to RBI policy repo rate, any change in the repo rate by the Central Bank would automatically be passed on to the customer," the Bank said. The repo rate, which is the interest rate at which the central bank provides liquidity to banks to overcome short-term liquidity mismatches, is currently at 5.40 per cent.
Bank of Maharashtra (BoM) has linked all new floating rate loans, retail segment and micro & small enterprises (MSME) to RBI's policy repo rate with effect from October 1, 2019. In addition, loans to ‘medium enterprises’ also have been linked to repo rates.
"Through linking of repo rate to retail and MSME loans, the bank is passing interest rate benefits directly to its customers," the Pune-headquartered public sector bank said in a statement.
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