Mumbai: Leading public sector bank in the country, Indian Overseas Bank (IOB) has reduced the Repo Linked Lending Rate by 25 basis points with immediate effect. Recently, the Reserve Bank of India in its latest Monetary Policy Committee meeting decided to reduce the Policy Repo Rate from 6.25 per cent to 6 per cent.
The Asset Liability Management Committee of IOB in its meeting has decided to pass on the rate cut to the customers by reducing the Repo Linked Lending Rate by 25 basis points from 9.10 per cent to 8.85 per cent.
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MCLR is the minimum rate of interest banks are allowed to give out loans to its customers. It is a benchmark interest rate and it dictates the lower limit of the interest rate for a loan. In 2019, the RBI introduced the external benchmark linked rate (EBLR) – which is linked to the repo rate – to further increase the pace of monetary policy transmission. Currently, all the retail loans are linked to EBLR. While any hike or cut in the repo rate gets immediately reflected in loans linked to EBLR, banks review interest rates under MCLR regime every month at a pre-announced date.
Earlier leading public sector banks reduced their lending rates, bringing relief to both existing and new borrowers. Bank of India, Bank of Baroda and UCO Bank have announced the rate cut. This move is expected to make loans cheaper, encouraging more borrowing by individuals and businesses.
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