Public-sector lender Dena Bank has lowered its marginal cost based lending rate (MCLR) across all tenors from October 1, 2017. The move comes less than a week before the Reserve Bank of India’s monetary policy review on October 4. The bank reduced its one-year, six-months and one-month MCLR by 15 basis points (bps) to 8.25%, 8.20% and 8.05%, respectively, it said in a statement. It cut the three-month and overnight MCLR by 20 bps to 8.10% and 8.00%, respectively. It also reduced its base rate to 9.60% from 9.70%. The overnight MCLR for State Bank of India, the country’s largest lender, is 7.75%, while the one-year and six-month MCLR stands at 8.00% and 7.95%. SBI has recently reduced its base rate to 8.95% from 9.00%, effective October 1. The credit growth in the Indian banking system has been tepid due to a sluggish economic environment, lack of private investments and higher borrowing from the bond market, where the rate of interest is lower. Reduction in interest rates are seen as efforts by lenders to spur credit growth, bankers said.
During the fortnight ending September 15, non-food bank credit grew 7.52% year-on-year with outstanding loans to companies and individuals rising to Rs 77.27 lakh crore from Rs 71.86 lakh crore in the same fortnight last year, latest data from the RBI showed. Private placement of corporate bonds stood at Rs 2.73 lakh crore in the first five months of the current fiscal year, data available from market regulator Sebi showed.
The total issuance of corporate bond in the April-June quarter was Rs 1.66 lakh crore, compared with Rs 1.28 lakh crore in the year-ago period. The data on the total issuance of corporate bonds is published on a quarterly basis. Earlier this month, Bank of India slashed its one-year MCLR by 10 bps to 8.30%. It has also slashed MCLRs for other tenors by 5-10 bps. IDBI Bank, too, had reduced its MCLR by 10 bps to 8.55%. other state-run banks including Punjab National Bank and Union bank had slashed their one-year MCLT by 20 bps to 8.15% and 8.20%, respectively. These cuts came after the RBI lowered its key repo rate by 25 bps to 6.00% at its August policy.
Credit ratings agency ICRA expects the Monetary Policy Committee of the RBI to leave the repo rate unchanged at 6.0% in a split decision in the upcoming policy review, given the expectation of a further rise in the CPI inflation in the coming months. “We do not expect a rate cut in the upcoming Policy review, as the CPI inflation is expected to chart an upward trajectory over the coming months, and print between 4.5-5.0% in March 2018,” it said in a statement.