A host of banks, including SBI, HDFC Bank, PNB, Canara Bank and BoB, on Thursday announced lending rates based on marginal cost of funds, a new methodology that will take effect from Friday.
The new interest rates vary from 8.95 per cent for overnight to 9.35 per cent for three years, SBI said in a document posted on its website TOday.
The base rate or the minimum lending rate of the bank is 9.3 per cent.
Both HDFC Bank and BoB matched SBI’s lending rate of 9.20 per cent for one year and 9.3 per cent for a two-year loan. The rate of interest will be 9.35 per cent for a loan of three years duration.
BoB fixed interest rate of 9.65 per cent for 5-year loan.
The bank has also decided to levy a strategic premium of 0.35 per cent over and above the marginal cost of funds based lending rate (MClR) as above, BoB said in a statement.
PNB has pegged interest rate of 9.40 per cent for one year, 9.55 per cent for 3 years and 9.70 per cent for 5 years.
Subsidiaries of SBI, SBBJ and State Bank of Travancore has also announced lending rates.
As per SBBJ, rate for 3 months loans will be 9.5 per cent, 6 months 9.6 per cent and 9.7 per cent for one year.
Reserve Bank had asked banks to price fixed rate loans of up to three years based on their marginal cost of fund from April 1.
All banks will follow Marginal Cost of Funds based lending Rate (MClR) system, a new uniform methodology which will ensure fair interest rates to borrowers as well as to banks from Friday.
Currently, most banks decide lending rates based on average cost of funds.
According to India Ratings and Research (Ind-Ra) the implementation of Marginal Cost of Funds-based lending rate (MClR) has the potential to channelise the recent surge of volumes in the commercial paper market towards bank credit.
Ind-Ra expects the shortest tenor MClR for bigger banks to be around 90-100 basis points lower than the base rate, while making it comparable to commercial paper rates with similar tenor.