After RBI’s Rate Cut, These 4 Public Sector Banks Cut Lending Rate – Find Out Which Ones

Following the Reserve Bank of India's recent decision to reduce the repo rate by 50 basis points, several public sector banks have responded by cutting their lending rates. This move could provide greater relief to existing borrowers rather than new ones, as banks adjust their spreads to maintain profitability.

RBI's Repo Rate Cut and Its Impact

The Reserve Bank of India announced a 50 basis point reduction in the repo rate, a benchmark used by banks to price loans. This decision aims to support economic growth and ease borrowing costs. According to RBI guidelines, floating-rate loans must adjust automatically with changes in the benchmark rate, offering relief to existing borrowers.

4 Public Sector Banks Revise Lending Rates

4 major public sector banks have acted promptly following the RBI’s announcement:

• Bank of Baroda: Reduced its Repo-Linked Lending Rate (RLLR) by 50 basis points to 8.15% from June 7.
   
• Punjab National Bank: Brought down its RLLR to 8.35%, effective June 9, while maintaining its Marginal Cost of Funds-based Lending Rate (MCLR).
   
• Bank of India: Decreased its repo-based lending rate by 50 basis points to 8.35% from June 6.
   
• UCO Bank: Lowered both RLLR by 50 basis points to 8.30% and MCLR by 10 basis points across all tenures, bringing its 1-year MCLR to 9%.

Read More: RBI Cuts Repo Rate by 50 Basis Points: Auto Loan Borrowers Could See EMI Decrease! 

Private Sector Response and Adjustments

Among private lenders, HDFC Bank reduced its MCLR by 10 basis points across tenures from June 7. Overnight and one-month rates are now at 8.9%. While MCLR revisions are not directly linked to the repo rate, the trend suggests a broader move toward easing lending rates.

Fixed Deposit Rates May See Downward Pressure

To maintain profitability amid the lending rate reductions and surplus liquidity in the system, banks are expected to lower returns on fixed deposits. This adjustment may make fixed deposits less attractive for savers, especially those seeking guaranteed returns amid inflation concerns.

Conclusion

The RBI’s decision to reduce the repo rate has triggered a wave of lending rate cuts among public sector banks. While the move provides automatic benefits to existing borrowers with floating rates, new borrowers might face less favourable terms due to adjusted spreads. The anticipated reduction in fixed deposit returns also highlights banks' efforts to manage balance sheets in the face of shifting interest rate dynamics.

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