Housing finance major Housing Development Finance Corporation (HDFC) on Tuesday reduced its lending rates by 50-55 basis points (bps) for all new home loans, effective January 3, according to a release.
After a number of state-owned and private banks announced reduction in their marginal cost of funds-based lending rate (MCLR), across tenures, in the past couple of days, five lenders cut their lending rates on Tuesday. The others to do so were mid-sized private-sector lender YES Bank, which cut its MCLR by 15 to 25 bps, effective January 1, Indiabulls Housing Finance, which reduced its home loans rates by 45 bps, and state-owned lender Bank of India, which is heard to have cut its MCLR by up to 90 bps, and Punjab & Sind Bank.
HDFC’s lending rate now stands at 8.65% per annum for women borrowers and 8.70% for others, while Indiabulls Housing Finance’s lending rates have been brought down to the same as HDFC’s, i.e. 8.65% for women and 8.70% for others.
Among banks, YES Bank’s one-year MCLR stands at 8.95%, while Bank of India’s one-year MCLR has apparently dropped down to 8.50%. Punjab & Sind Bank has also revised its MCLRs for different tenures with effective from January 4. The rates for overnight, one-month, three-month and six-month tenures stand at 8.60% , 8.60%, 8.65% and 8.70%, respectively.
So far in January, State Bank of India, ICICI Bank, Punjab National Bank, Union Bank of India, IDBI Bank, Central Bank of India, Kotak Mahindra Bank, Andhra Bank and State Bank of Travancore have cut their MCLRs. The cuts came 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 cost of funds.
According to the Reserve Bank of India (RBI), banks had garnered deposits worth R12.44 lakh crore between November 10, the first working day for bank branches after the decision to withdraw high-value currency notes 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, the country’s 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 Rs 1 crore, as against 7.05% before November 8.
The recent series of rate cuts also implies a quicker transmission of the rate easing cycle the RBI set in motion in January 2015, bringing down the repo rate by 175 bps to 6.25%. SBI’s recent move to bring down its one-year MCLR to 8% marks a 200-bps drop from its January 2015 base rate of 10%.
There is lack of clarity on what the central bank’s future rate actions might be, with members of the rate-determining monetary policy committee pitting concerns of a likely short-term slowdown in economic growth against those of achieving a 4% (+/-2%) rate of inflation on a durable basis, in the minutes of its latest meeting.