Rate cut bandwagon: 3 more banks slash lending rates by up to 1%

New Delhi: Three more banks including Syndicate Bank and Citi India on Friday reduced benchmark lending rates by up to 1 percent, joining others in the rate cut bandwagon.

Public sector Syndicate Bank reduced marginal cost of funds based lending rate (MCLR) by 0.7 percent to 8.75 percent for 1-year tenor, Syndicate Bank said in a filing on stock exchanges.

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

The bank has reduced MCLR by 1 percent to 8.35 percent from 9.35 percent for 1-month tenor, it said.

However, MCLR for the 6-month period has been reduced by 0.8 percentage points to 8.60 percent.

Foreign lender Citi India reduced its home loan rate by 0.7 percent.

It will reduce the interest rate to 8.80 percent from 9.50 percent, effective January 9, Citi India said in a statement.

Another public sector lender, Indian Overseas Bank also slashed the benchmark lending rate. Following reduction, the one-year MCLR has come down to 8.65 per cent effective tomorrow.

Private sector Kotak reduce base rate or the minimum lending rate by 0.1 percent to 9.3 percent.

Banks are flush with deposits following demonetisation.

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.