Bank of Baroda Implements RBI Rate Cut for Retail and MSME Customers
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Synopsis
On April 10, Bank of Baroda announced an immediate implementation of the RBI's policy rate cut, benefiting retail and MSME clients with lower lending rates. This initiative aims to provide affordable credit and support economic growth.
Key Takeaways
- Bank of Baroda cuts lending rates following RBI's policy change.
- Focus on aiding retail and MSME sectors.
- MCLR rates among the most competitive in the industry.
- Supports financial inclusion and economic growth.
- Rate transmission crucial for effective benefits to borrowers.
Mumbai, April 10 (NationPress) The state-owned Bank of Baroda has declared the swift implementation of the Reserve Bank of India's (RBI) recent policy rate reduction for its clientele.
The public sector bank communicated that it has lowered its external benchmark-linked lending rates for loans aimed at the Retail and MSME segments, ensuring that clients can promptly benefit from the RBI's monetary policy adjustment.
Moreover, the bank's overnight marginal cost of funds-based lending rate (MCLR) is currently at 8.15 percent, while its one-year MCLR is set at 9 percent, which the bank claims is among the most competitive rates in the market.
This initiative is designed to provide credit at affordable rates to both individuals and businesses, thereby aiding in broader economic expansion and financial inclusion, as stated by the Bank.
On Wednesday, RBI Governor Sanjay Malhotra announced a 25 basis point reduction in the policy rate from 6.25 percent to 6 percent and shifted the monetary policy stance from neutral to accommodative to promote economic growth.
The Governor noted that the decision to cut the repo rate was made unanimously by the monetary policy committee, taking into account the macroeconomic and financial conditions as well as the outlook.
A lower policy rate aims at decreasing the interest rates on bank loans, thereby facilitating borrowing for both consumers and businesses, which in turn stimulates higher consumption and investment in the economy, contributing to enhanced growth. However, the success of this rate cut largely depends on how swiftly and effectively commercial banks relay the benefits to borrowers.
With the RBI's cumulative 50 basis points reduction in policy rates since February this year, banks are anticipated to transmit the rate cuts in the forthcoming quarters, as per a report by SBI.
The report indicates that following the RBI's 25 basis point cut in the repo rate in February, public sector banks decreased deposit rates by 6 basis points, while foreign banks reduced rates by 15 basis points, and private banks increased their rates by 2 basis points. An analysis of the weighted average lending rate (WALR) on new loans compared to the repo rate reveals that WALR for public sector banks and scheduled commercial banks (SCBs) closely aligns with adjustments in the policy rate, indicating an effective and timely transmission mechanism.
