IDBI Bank doesn’t wait for RBI cue, cuts home loan rate

Surplus liquidity in the banking system is forcing banks to reduce rates even before the Reserve Bank of India’s (RBI) monetary policy tomorrow.

IDBI Bank has reduced its home loan rates by around 0.60%. The home loans of the bank are now at 8.55% to 8.7%. The lowest rate of 8.55% is applicable to the priority sector loans.

The bank has also reduced its one-year marginal cost based lending rate (MCLR) to 8.60% with effect from February 1. MCLR is the rate to which most of the loans are pegged.

While the two-year rate is pegged at 8.85%, the one-month rate is 8.40% and the overnight rate at 8.20%.

Mythili Balasubramanian, executive director, IDBI Bank, told DNA Money, “Across maturities, the reduction in the home loan rates are about 0.60%, and we are now in line with our competitors. Home loans is a big focus area for the bank. We are planning a reduction on our car loan rates also but this is a very small portfolio.”

With this reduction, loans across categories will be cheaper by 0.30 % to 0.35% on various tenures.

The bank said in a release, “The reduction in MCLR is expected to positively impact loan growth; both in the retail consumer segment and corporate sector lending, thereby supporting the growth impulses in the economy.”

Banks across the board are expected to keep the rates low as the liquidity improves.