A clutch of banks, including State Bank of India, HDFC Bank and Bank of Baroda, on Thursday announced their new lending rates for various tenors. For example, the new one-year benchmark lending rate ranges from 9.20 to 9.85 per cent compared with the existing base rate of 9.30 per cent to 9.95 per cent.
The announcements came in the wake of the Reserve Bank of India asking scheduled commercial banks (excluding regional rural banks) to price all loans with reference to the marginal cost of funds-based lending rate (MCLR) with effect from April 1. Actual lending rates will be determined by adding the components of spread — business strategy and credit risk premium — to the MCLR, which is being ushered in to improve the efficiency of monetary policy transmission.
MCLR comprises marginal cost of funds, negative carry on account of cash reserve ratio (the deposits parked with the central bank), operating costs and tenor premium.
One basis point is equal to one-hundredth of a percentage point.
A senior SBI official said with the introduction of MCLR, home loans will get cheaper by 10 basis points.
The new home rates will be 9.45 per cent (against 9.55 per cent). For women borrowers, the rate will be 9.40 per cent (9.50 per cent).
Commercial papers India Inc could shift gears when it comes to raising short-term resources, moving away from commercial papers (CPs) towards bank credit, following implementation of the MCLR regime by banks.
CP is an unsecured money market instrument issued in the form of a promissory note by rated companies.