Good news for borrowers! Two of India’s leading public sector banks—Punjab National Bank (PNB) and Bank of India (BoI)—have recently announced cuts in their Marginal Cost of Funds-based Lending Rates (MCLR).
For retail and corporate customers, this means cheaper loans and reduced EMIs. Here’s a breakdown of what this move means for your borrowing costs.
What Is MCLR?
Definition: MCLR is the minimum lending rate below which banks cannot lend. It directly influences the interest rate on loans like home loans, personal loans, education loans, and car loans.
Linked to RBI policy: When banks cut MCLR, borrowers see a drop in their EMIs—especially if their loans are linked to floating rates.
Latest MCLR Cuts by PNB and BoI
Punjab National Bank (PNB): Reduced MCLR by up to 5–10 basis points across select tenures.
Bank of India (BoI): Announced a similar cut in short- and medium-term MCLR.
Impact: Home loan and personal loan borrowers may see lower EMIs starting this month.
How This Eases Borrowing Costs
Lower EMIs: Even a small cut of 5–10 bps can reduce EMIs significantly over long tenures.
Cheaper New Loans: Fresh borrowers benefit immediately from lower interest rates.
Better Refinancing Opportunities: Existing borrowers can consider balance transfer to take advantage of lower MCLR.
Boost for Real Estate & Auto Sectors: Affordable loans drive higher demand in housing and automobile purchases.
Things to Keep in Mind
Reset Dates Matter: Existing floating-rate borrowers will see benefits only after their loan reset date.
Repo vs. MCLR Loans: Many banks now link loans to the Repo Rate. If your loan is repo-linked, MCLR cuts won’t affect you.
Compare Across Banks: Don’t just rely on one bank’s cut—compare offers to get the best deal.
Conclusion
The MCLR cuts by PNB and BoI are a welcome relief for borrowers, especially in a high-cost environment. While the benefit may seem modest, over the long term it can significantly reduce your interest burden. For new borrowers, this is the perfect time to lock in a cheaper loan.
FAQs
Q1. What is MCLR in banking?
MCLR is the benchmark lending rate set by banks, below which they cannot lend. It directly impacts loan interest rates.
Q2. How much did PNB and BoI cut their MCLR?
Both banks cut their MCLR by 5–10 basis points across select tenures.
Q3. Which loans are linked to MCLR?
Home loans, personal loans, car loans, and some corporate loans are linked to MCLR.
Q4. Will all borrowers benefit immediately?
Not necessarily. Floating-rate borrowers will see benefits only after their loan reset date.
Q5. Should I consider refinancing my loan after this cut?
Yes, if your current interest rate is significantly higher, refinancing or balance transfer may help reduce costs.
Published on : 8th September
Published by : SMITA
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