Allahabad Bank to cut MCLR by ten bps

The state-owned bank Allahabad Bank has taken the lead in lowering its lending rates, following the RBI’s appeal last week for the softer rates after its 25 bps repo rate failed to achieve the monetary transmission. The Governor of RBI Shaktikanta Das urged the country’s top bankers to lower their lending rates.

The Allahabad Bank exited the prompt correction action (PCA) framework on Monday only, has reduced its marginal cost-based lending rate by ten bps which will be effective from March 1. And as a result, the home loan, car loan, and other retail loans will get cheaper.

The one bps is equal to one-hundredth of 1%.

Despite the RBI’s urged to the country top banks, there are still some doubts on how the banks will lower their lending rates when the rates of deposit are unchanged due to year-end pressure and tight liquidity.

After the RBI’s statement, the SBI was the lone lender to announce a cut of 5 bps on home loan rates even there was no room for the reduction unless there is no drop in the deposit rates, but the SBI kept MCLR (Marginal Cost of Funds based lending Rate) unchanged.