After SBI, PNB, Kotak Mahindra Bank cuts lending rate by up to 0.45%

A day after SBI slashed its rate offering steeply, country's fourth biggest private sector lender Kotak Mahindra Bank on Monday announced a cut of up to 0.45 percent in its lending rates.

The bank has cut marginal cost of funds based lending rate by 0.20 to 0.45 percent across tenors, it said in a statement.

The one year MCLR, which is used as the benchmark for a bulk of long-term consumer loans, has been reduced by 0.20 percent while the maximum cut of 0.45 percent has been effected in the one month and three month MCLRs.

After revision, the one-year MCLR comes down to 9 percent, while the one month and three month MCLRs will be 8.25 percent and 8.40 percent, respectively.

The overnight MCLR --- which is generally a bank's most aggressive MCLR offering --- has been cut by 0.40 percent to 8.20 percent.

The revised rates are applicable from January 1, 2017 onward, the statement said.

A day after Prime Minister Narendra Modi exhorted banks to prioritise lending towards poor and lower middle class, SBI cut its MCLR by a steep 0.90 per cent, setting the stage for its smaller peers to follow-suit.

Prime Minister Narendra Modi on Saturday admonished banks to "keep the poor, the lower middle class, and the middle class at the focus of their activities," and to act with the "public interest" in mind.

Modi`s comments were made in a special New Year`s eve speech in which he defended his ban on higher-value cash notes and announced a slew of incentives including channelling more credit to the poor and the middle class.

Among others, state-run Punjab National Bank cut its MCLR rates by 70 basis points, Union Bank of India cut its MCLR rates by 65 to 90 basis points, while Dena Bank cut its one-year MCLR rate by 75 basis points.

Some smaller banks like State Bank of Travancore and IDBI Bank had already announced MCLR cuts in the last week of December.

"While respecting the autonomy of banks, I appeal to them to move beyond their traditional priorities and keep the poor, lower middle class and middle class at the focus of their activities," Modi had said.

Banks have moved to MCLR as their new benchmark lending rate from April 2016, replacing the base rate system for new borrowers. It is calculated on the marginal cost of borrowing and return on net worth for banks. It was introduced by RBI to ensure better transmission of its policy actions.

With Agency Inputs