Biznextindia : Public sector bank ‘Bank of Baroda’ has announced reduction in its Marginal Cost of Funds based lending rates (MCLR) upto 30 basis points (BPS) or 0.3%. Following this reduction, Home, Auto loans of the bank are expected to be cheaper.
The bank’s overnight MCLR has been reduced by 30 bps to 6.70 % from the existing 7.00%. One-month MCLR has been reduced by 5 basis points to 7.10%, Three-month MCLR to 7.25%, Six Month MCLR to 7.40%.
Similarly, MCLR for one-year tenure has come down to 7.55% per annum, from the existing 7.60%. The revised rates will be effective from 12th September, the bank said in a stock market filing.
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.