New Delhi: Private sector Axis Bank on Wednesday announced a cut in its marginal cost of fund-based lending rate (MCLR) by 0.15-0.20 percent effective coming Friday.
"Axis Bank reviews and reduces the MCLR by 15 basis points (bps) or 0.15 percent across all tenures up to 1 year and by 20 bps for 2-year and 3-year tenures. The reduced MCLRs will take effect starting 18 November, 2016," the lender said in a statement here.
For loans of overnight tenure, the new MCLR will be 8.65 percent. One-month tenure will attract a rate of 8.70 percent while those for three and six months will be 8.90 and 9 percent, respectively.
For one year, the new MCLR will be 9.05 percent. The bank will levy interest rate of 9.10 percent and 9.15 percent for two years and three years, respectively.
Following the Reserve Bank of India (RBI) cutting its repo rate by 25 bps last month, public sector lenders United Bank of India, Canara Bank, Indian Bank, Indian Overseas Bank, Bank of India and Syndicate Bank, as well as private sector ICICI Bank and Kotak Mahindra Bank, have cut lending rates.
To nudge banks to transfer the benefit of RBI rate cuts, previous Governor Raghuram Rajan had announced a shift to the MCLR regime.
Under the MCLR, banks need to consider their marginal cost of funds, or the cost incurred on incremental deposits across different maturities, to decide on interest rates.
However, though Rajan -- during his tenure -- had cut rates by 150 bps since January 2015, banks had hardly moved at the same pace to cut their lending rates.
From the state-run banks` point of view, their accumulation of massive non-performing assets (NPAs), or bad loans, that is impacting profitability, is keeping them from cutting rates.