Five more PSBs link deposit, loan rates to repo

Mumbai: Despite RBI giving them more leeway due to their poor bottomlines, five more state-run banks Friday announced linking their lending and deposit rates to the repo to facilitate faster transmission, following their larger per State Bank, which had linked its deposits and loans to the repo from May.

While Syndicate Bank Friday said it has decided to link is deposits and loans to the repo rate for a wide range of products, its larger peers Bank of India, Union Bank and Allahabad Bank also said they are working on the modalities to launch similar products.

Allahabad Bank has reduced its Marginal Cost of Fund based Lending Rate (MCLR) by 15 to 20 bps. The revised MCLR for different tenors will be effective from August 14, 2019.

"The bank will be exploring to develop products of both assets and liabilities linked with external benchmark to transmit the benefits of rate cut to our customers shortly," Allahabad Bank managing director SS Mallikarjuna said.

Allahabad Bank also reviewed the interest rate on Term Deposits and has decided to reduce the rate of interest on retail Term Deposits by 10 bps across all buckets in more than 1 year. The revised rates of the Term Deposit will be applicable from September 1, 2019.

"Housing, vehicle and consumer loans will now be offered at a rep0-linked rates basis. With the change, the housing loans will start from repo plus 2.90 percent at 8.30 percent," Syndicate Bank said in a statement.

Its saving bank deposits over Rs 25 lakh will also be based on the repo rate, it added.

Bank of India said another dimension of rate transmission process is by way of offering repo linked lending rate to select customer segments, including personal loans. "We are working out the necessary modalities in this regard so as to launch such products during the current month," Bank of India said.

Union Bank said to provide better interest rate transmission it shall soon link its housing and vehicle loan portfolio to repo rate from the current marginal cost of funds based lending rate.

Another state-owned lender Indian Bank too said its home and vehicle loans will inked to the repo rate from August 15.

These loans will carry interest that changes with the repo rate and thus facilitate quick transmission of the policy rate and will be effective from August 15, Indian Bank managing director Padmaja Chunduru said. The move to link the deposit and lending rates by these four lenders come even as the Reserve Bank has not mandated them to do so.