Allahabad Bank cuts lending rate by 0.85%

New Delhi: Public sector lender Allahabad Bank on Monday slashed its benchmark lending rate by 0.85 percent in line with market competition.

The bank has reduced marginal cost of funds based lending rate (MCLR) by 0.85 percent to 8.60 percent for 1 year tenor, Allahabad Bank said in a statement.

With the reduction in benchmark rate, home, car and other loans linked to MCLR would become cheaper.

Banks have switched to MCLR as their new benchmark lending rate from June last year, replacing the base rate system for new borrowers. It is calculated on the marginal cost of borrowing and return on net worth for banks. It was introduced by RBI to ensure fair interest rates to borrowers as well as banks.

MCLR also seeks to address the regulator's primary objective of expediting monetary policy transmission along with augmenting uniformity and transparency in the calculation methodology of lending rates. MCLR rates are revised every month.