RBI Cuts Repo Rate: Major Banks Slash Lending Rates; Know Objective Behind It
RBI Repo Rate Cut: In a bid to boost economic momentum, several major banks have followed the Reserve Bank of India's (RBI) lead after it cut the repo rate by 50 basis points. Among them, Punjab National Bank (PNB), Bank of India, and UCO Bank have announced reductions in their lending rates.
The RBI's move is aimed at making borrowing easier and more affordable for both individuals and businesses. Wasting no time, Punjab National Bank was quick to respond, bringing down its repo-linked lending rate from 8.85% to 8.35%, setting the tone for others to follow.
Bank of India Repo Rate:
Bank of India responded to the RBI's repo rate cut by lowering its repo-linked lending rate from 8.85% to 8.35%, as disclosed in a stock exchange filing. However, the bank chose to keep its base rate and marginal cost of funds-based lending rate (MCLR) unchanged.
UCO Bank Reduces MCLR Across All Loan Tenures
Taking a slightly different path, UCO Bank opted to reduce its MCLR by 10 basis points across all loan tenures. This move, effective from June 10, aims to ease borrowing costs for various types of loans, including home and personal loans.
Specifically, UCO Bank trimmed its overnight MCLR from 8.25% to 8.15%, the one-month rate from 8.45% to 8.35%, and the three-month rate from 8.6% to 8.5%. The six-month and one-year MCLRs were also adjusted to 8.8% and 9%, respectively.
Bank of Baroda Repo Rate:
Adding to the trend, Bank of Baroda announced a 50 basis point cut in its repo-linked lending rates for select loan tenures. These rate revisions follow the RBI's latest decision—announced by the Monetary Policy Committee led by Governor Sanjay Malhotra—to lower the repo rate, the key policy rate at which the central bank lends to commercial banks. The broader goal: to ease borrowing costs and stimulate economic activity.
Objective Behind Cut In Repo Rate
The objective behind the rate cut is to energise the economy by encouraging spending and investment through cheaper loans. In addition to the repo rate cut, the RBI also reduced the Cash Reserve Ratio (CRR) by 100 basis points, from 4 per cent to 3 per cent.
Repo Rate Reduction In Four Phases
This reduction will be rolled out in four phases and is expected to inject Rs 2.5 lakh crore of liquidity into the banking system. The CRR is the portion of bank deposits that must be maintained with the RBI, and lowering it allows banks to lend more. (With Inputs From IANS)
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