Following SBI many more PSBs cut lending rate

Syndicate Bank on Friday said it has decided to link its deposits and loans to the repo rate for a wide range of products, its larger peers Bank of India, Union Bank and Allahabad Bank also said they are working on the modalities to launch similar products.

Mumbai: Despite RBI giving them more leeway due to their poor bottom lines, five more state-run banks on Friday announced linking their lending and deposit rates to the repo to facilitate faster transmission, following they're larger per State Bank, which had linked its deposits and loans to the repo from May.

While Syndicate Bank on Friday said it has decided to link its deposits and loans to the repo rate for a wide range of products, its larger peers Bank of India, Union Bank and Allahabad Bank also said they are working on the modalities to launch similar products.

"Housing, vehicle and consumer loans will now be offered at the basis of a repo-linked rate. With the change, the housing loans will start from repo plus 2.90 per cent at 8.30 per cent," Syndicate Bank said in a statement.

Its saving bank deposits over Rs 25 lakh will also be based on the repo rate, it added.

Bank of India said another dimension of rate transmission process is by way of offering repo linked lending rate to select customer segments, including personal loans.

"We are working out the necessary modalities in this regard so as to launch such products during the current month," Bank of India said.

Union Bank said to provide better interest rate transmission it shall soon link its housing and vehicle loan portfolio to repo rate from the current marginal cost of funds based lending rate.

Another state-owned lender Indian Bank too said it's home and vehicle loans will ink to the repo rate from August 15.

These loans will carry interest that changes with the repo rate and thus facilitate the quick transmission of the policy rate and will be effective from August 15, Indian Bank managing director Padmaja Chunduru said.

Allahabad Bank said it has reduced its MCLR by 15 to 20 basis points (bps) for different tenors, effective from August 14 while another public sector lender UCO Bank announced that it has cut the same by 15 bps across all tenors.

The move to link the deposit and lending rates by these four lenders come even as the Reserve Bank has not mandated them to do so.

In May, SBI had said it would link its short-term loans and large savings deposits rates to the repo rate and its home loans from July.

The nation's largest lender linked its savings accounts with deposits over Rs 1 lakh and all cash credit accounts and overdrafts or short-term loans with limits above Rs 1 lakh, to the repo rate.

In the post-policy meeting with the reporters, RBI governor Shaktikanta Das had said the central bank recognizes that banks are just about coming out of their NPA mess amidst slow deposit growth.

"So, administratively, we did not want to mandate it (external benchmarking) at that particular time; we are monitoring the situation and will take whatever steps are required to ensure better transmission.