The bank’s lending rate is linked to the RBI’s repo rate which was reduced by 75 bps from 5.15 per cent to 4.40 per cent on March 27.
Public sector lender Bank of India on Sunday announced cutting its external benchmark lending rate, linked to the Reserve Bank of India’s (RBI) repo rate, by 75 basis points to 7.25 per cent per annum. With this, the bank said it has “passed on the benefit of rate cut announced by RBI on March 27, 2020” to its MSME, home, vehicle loan customers. The revised rates will be effective from April 1, 2020. The bank’s lending rate is linked to the RBI’s repo rate which was reduced by 75 bps from 5.15 per cent to 4.40 per cent on March 27. This will help MSMEs and other borrowers to likely secure loans at lower interest rates that might also lead to a decline in the cost of loans.
Bank of India also announced reducing its benchmark Marginal Cost of Funds Lending Rate (MCLR) by 25 basis points across tenors, from one year to one month, and by 15 basis points for overnight tenor. The one-year MCLR is now 7.95 per cent per annum from 8.20 per cent. For six months, three months, one month and overnight, the MCLR stands at 7.85 per cent, 7.80 per cent, 7.75 per cent, and 7.25 per cent respectively.
Recently other banks have also reduced their MCLR for one year. For instance, the State Bank of India had cut the MCLR by 10-15 basis points across tenors effective from March 10 while the Union Bank of India had announced 10 basis points cut in the MCLR from March 11. Importantly, as on February 2020, the median one year MCLR of public lenders has declined from 8.75 per cent since February 2019 to 8.20 per cent while for private banks, the figure slashed to 9.10 per cent to 9.28 per cent during the said period.
Last week, Finance Minister Nirmala Sitharaman had announced that the government would contribute the 24 per cent share of both employee and employer to the Employees’ Provident Fund for the coming three months. The move is likely to help MSMEs to manage cash flows and liquidity. “MSME would not be worried about the deadline of payments. Hence, there would be no violation on account of missing the deadline even as they won’t have to worry about interest or penalty for late payments,” Sanjay Bhatia, President, FICCI-CMSME had told Financial Express Online.