Mumbai : Public Sector State Bank of India has slashed its Marginal Cost based lending rates (MCLR) of all tenures by 5 basis points. This is the 2nd rate cut by the largest lender in a span of about one month.
While the overnight and one month MCLRs have been reduced to 8.10% from 8.15% earlier, One year MCLR has been reduced to 8.45% from 8.50% earlier. Two & Three year MCLRs have been reduced to 8.55% and 8.65% respectively. The new rates have been made effective from today.
The marginal cost of funds based lending rate (MCLR) refers to the minimum interest rate of a bank below which it cannot lend, except in some cases allowed by the RBI. It is an internal benchmark or reference rate for the bank. MCLR actually describes the method by which the minimum interest rate for loans is determined by a bank – on the basis of marginal cost or the additional or incremental cost of arranging one more rupee to the prospective borrower. The MCLR methodology for fixing interest rates for advances was introduced by the Reserve Bank of India with effect from April 1, 2016. This new methodology replaces the base rate system introduced in July 2010.