HDFC Bank joins rate cut bandwagon, cuts lending rates by up to 0.9%

New Delhi: Joining the rate cut bandwagon, HDFC Bank, Wednesday lowered its lending rates by up to 0.9 percent -- which will lead to cheaper home and corporate loans.

Among banks, Corporation Bank, Bank of India and Punjab & Sind Bank on Tuesday slashed their marginal cost of funds based lending rate (MCLR).

Taking a cue from State Bank of India and other major lenders, mortgage finance company HDFC Ltd, Indiabulls Housing Finance too reduced lending rate by up to 0.45 percent.

Loans up to Rs 75 lakh will attract interest rate of 8.7 percent per annum, while it will be 8.75 percent for higher amounts, HDFC said in a statement.

A woman applicant will get a discount of 0.05 percent in interest rate.

HDFC's earlier benchmark rate was 9.1 percent. Besides, Bank of India reduced its MCLRs upto 0.9 percent.

For one year, the MCLR is now 8.50 percent, down 0.75 percent. However, overnight MCLR has been reduced by 0.9 percent to 8.1 percent effective January 7.

Another public sector lender Punjab and Sind Bank lowered the one-year MCLR to 8.75 percent, down by 0.8 percent.

At the same time, it also slashed base rate or the minimum lending rate by 0.05 percent to 9.70 percent.

Corporation Bank also lowered 1-year MCLR rate by 0.7 percent to 8.75 percent. Spurt in deposit due to demonetisation has provided banks space for lowering lending rate.

The reduction in lending rates may prompt increase in credit offtake which has moderated substantially putting burden on balance sheet of banks.

More banks are expected to cut the lending rate in the coming days. Even fixed deposit rates are expected to come down and announcement to this effect would be made in the next few days.

Banks have switched to MCLR as their new benchmark lending rate from June last year, 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 fair interest rates to borrowers as well as banks.

MCLR also seeks to address the regulator's primary objective of expediting monetary policy transmission along with augmenting uniformity and transparency in the calculation methodology of lending rates. MCLR rates are revised every month.

With PTI Inputs