Canara Bank has been decided to reduce the Repo-Linked Lending Rate (RLLR) and Marginal Cost of Funds based Lending Rate (MCLR) by 40 basis points and 20 basis points, respectively, with effect from June 7, 2020. The Bengaluru-headquartered public sector bank, in a regulatory filing, said the new RLLR will be 6.90 percent against 7.30 percent now. Following a regulatory directive, the Banks are linking all new floating rate personal or retail loans that is housing, auto, etc. and floating rate loans to Micro, Small, and Medium Enterprises since 1st October 2019, to an external benchmark.
The majority of the banks are using the repo rate as of the external benchmark. Repo rate is an interest rate at which the Reserve Bank of India (RBI) provides funds to banks to help them to overcome the temporary liquidity mismatches.
Canara Bank has also reduced its MCLR. The MCLR has reduced by 20 basis points across the board as well. The revised one-year benchmark MCLR will be 7.65 percent against 7.85 percent now.
Additionally, The revised lending rates will be effective from 7th June 2020, as Canara Bank told in a statement. All new retail loans that are housing, education, vehicle, credit to MSMEs are linked to the RLLR. Many banks have passed on the benefit of reduction in 40 bps in repo rate that announced by the Reserve Bank of India in May through cuts in their RLLR. Recently, some lenders, including Punjab National Bank, Bank of India and UCO Bank, slashed their lending rates linked to repo rate by 40 bps as well. With the reduction, it said the one-year MCLR has been revised down to 7.65 percent from the existing 7.58 percent. For six months, the rate has reduced to around 7.60 percent. Overnight and one-month MCLRs have reduced by around 20 basis points to 7.30 percent each. Six-month MCLR has been also revised to 7.55 percent from 7.75 percent. The reduction in MCLR will bring down the burden on borrowers.