Private-sector lender Axis Bank on Friday reduced the marginal cost of funds-based lending rates (MCLRs) by 65 to 70 basis points (bps) across tenures, effective January 18.
The bank’s one-year MCLR now stands at 8.25%, as against 8.9% earlier. The overnight and one-month MCLRs were reduced to 7.9% from 8.55%, the three-month rate was lowered to 8.05% from 8.75%, and the six-month rate was cut to 8.15% from 8.85%.
Almost all leading banks, including State Bank of India (SBI), ICICI Bank, HDFC Bank, Punjab National Bank, Bank of Baroda and Bank of India, reduced their MCLRs in January.
Axis Bank’s large peers SBI, ICICI Bank and HDFC Bank now have their one-year MCLRs at 8%, 8.2% and 8.15%, respectively.
The cuts have come in reaction to a demonetisation-induced deluge of deposits with banks and a resultant drop in their marginal cost of funds. As per the MCLR regime, which replaced the base rate regime in April 2016, banks review their benchmark lending rates every month on the basis of their incremental costs of funds, among other factors.
According to the Reserve Bank of India (RBI), banks garnered deposits worth Rs 12.44 lakh crore between November 10, the first working day for bank branches after the note ban was announced, and December 10.
The central bank has not released any data on deposits entering the banking system subsequently.
With the phenomenal jump in deposits, leading banks have cut rates on one-year retail fixed deposits by between 15 bps and 90 bps. SBI now offers 6.9% on one-year deposits of less than R1 crore, as against 7.05% before November 8, 2016.
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The recent series of rate cuts also implies a quicker transmission of the rate-easing cycle the RBI had set in motion in January 2015.
SBI’s recent move to bring down its one-year MCLR to 8% marks a 200-bps decline from its January 2015 base rate of 10%.