Latest news with #MCLR
Business Upturn
3 days ago
- Business
- Business Upturn
Karur Vysya Bank cuts MCLR by up to 25 bps across tenures, effective July 7
By Aditya Bhagchandani Published on July 7, 2025, 11:27 IST Karur Vysya Bank announced a reduction in its Marginal Cost of Funds Based Lending Rates (MCLR) across all loan tenures, effective July 7, 2025, according to a regulatory filing with NSE and BSE. The move is expected to lower borrowing costs for customers across various loan products linked to MCLR. As per the disclosure, the overnight MCLR has been reduced by 10 basis points (bps) from 9.35% to 9.25%. The one-month MCLR has come down from 9.50% to 9.40%, while the three-month MCLR saw the sharpest cut of 25 bps, dropping from 9.65% to 9.40%. Similarly, the six-month and one-year MCLRs have both been reduced from 9.80% to 9.55%, a cut of 25 bps each. The revised rates are as follows: Overnight: 9.25% One Month: 9.40% Three Months: 9.40% Six Months: 9.55% One Year: 9.55% The bank's move comes at a time when the broader interest rate environment remains stable, and banks are competing to offer more attractive rates to borrowers. This cut is expected to benefit both retail and corporate borrowers with loans linked to the bank's MCLR. Karur Vysya Bank communicated the revision under Regulation 30 of SEBI's Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015. The reduction in MCLR is in line with the industry trend of marginal easing in lending rates and could help support credit growth in the coming quarters. Ahmedabad Plane Crash Aditya Bhagchandani serves as the Senior Editor and Writer at Business Upturn, where he leads coverage across the Business, Finance, Corporate, and Stock Market segments. With a keen eye for detail and a commitment to journalistic integrity, he not only contributes insightful articles but also oversees editorial direction for the reporting team.
Economic Times
3 days ago
- Business
- Economic Times
There is scope for a 25-bps repo cut in 2025... RBI will look at data, aid growth, says SBI MD Rama Mohan Rao Amara
Agencies Rama Mohan Rao Amara Surplus liquidity is a 'pleasant problem' for State Bank of India (SBI), Rama Mohan Rao Amara, MD, International Banking, Global Markets and Treasury, tells ET's Joel Rebello and Sangita Mehta. He oversees a ₹66-lakh-crore balance sheet at India's most-valued government lender as head of its treasury. SBI expects another quarter-point reduction in policy rate this calendar year, Amara acknowledged that mobilising deposits is a tough task when depositors look for higher returns in a falling interest rate scenario, even as geopolitics, digital fraud and imported inflation remain key risks. What are the practical challenges that banks face after the unexpected cuts in repo and CRR? It is a pleasant problem to have from a situation of running into a deficit only a few months ago. A lot of credit goes to the Reserve Bank of India (RBI) that from a deficit, we have moved to a system-level surplus with ₹9 lakh crore of durable liquidity. Short term rates are plummeting after the cuts. The change in stance by the RBI (to neutral) was surprising, indicating long-term rates are here to stay and this has led to a steepening of the curve. For a long time, long-term yield was almost flat and in certain sections inverted. We expect the short term rates to still come down further, with the long term moving sideways. We expect the ten year to be in a broad range of 6.1% to 6.4% and the rupee to be in the ₹84 to ₹86 per dollar range. How do you expect rate cuts to be transmitted to the broader loan books? The transmission is still playing out. Year after year, loans linked to EBLR (External Benchmark Linked Lending Rate) have increased. The portfolio which is linked to MCLR (Marginal Cost Based Lending Rate) and other rates will slowly witness the transmission. So when transmission is complete, if inflation plays out as expected, the RBI may look at the data points and definitely there is further scope for a 25 basis point cut in repo this calendar year, and that is our house view also. What could be the triggers for another cut? Favourable factors like a normal monsoon-and certainty on the trade front. These are all triggers for them (RBI) to take a call. It gives them room or the manoeuvrability to aid the growth as well. I think the next decision on rate cut will be more data based. The front loading has given them enough time to observe how the system is behaving. So they will have the benefit of looking at the data, and of course, they will take measures to aid the growth. With the banking system flush with liquidity, how low can deposit rates fall for banks to keep attracting customers? It's been a challenge for the last few quarters. Every bank is prioritising deposit growth in face of competition from mutual funds or the insurance companies. Banks have to adopt a multi-pronged approach in improving customer engagement, creating innovative products which is possible thanks to technology advancement and use of AI-ML. You have to customise and even with a hyper personalisation where you make the right offer at the right time to a customer. That kind of hyper personalisation is possible thanks to technology advancement and use of AI-ML. You have to sweat all your channels, retail franchise, digital channel, or third party ecosystem. Individuals also will have a propensity to lock into the fixed deposit rates now anticipating a decline in the interest interest rates declining, corporates are shifting to bonds. How are banks protecting margins?We have an active treasury looking for opportunities. We have an active corporate investment book, though not comparable to the loan book growth. On margins, we are working on two fronts, wherever opportunities are there, we invest in the corporate investments short term, and also working on how to reduce deposit costs. SBI has already announced QIP plans. Are there any fundraising plans through infra bonds or tier two bonds for this year? As on date, the total outstanding infrastructure bonds with SBI is ₹69,718 crore. We have a sizeable infra book to support infra bonds. But if we feel like that net of all the costs, that is a much cheaper option, we will go for it. Last year, we saw a record dollar fund raise. Given the expected decline in the Fed rate and hedging costs, will corporates still be interested in dollar bonds? The difference between the dollar and rupee 10 year G sec has narrowed to 1.8% versus 3% a few quarters ago. Ample liquidity will incentivise corporates to tap the domestic market. For the ECB, without a natural hedge you are running into risks. But some NBFCs want to diversify their resource base, so they will be looking at ECB. But as on date, if you ask me, there is a more incentive for the corporates to tap into their domestic rupee because of ample liquidity. The RBI's biggest concern is breakdowns of IT infrastructure by financial institutions. Given SBI's size, how are they navigating these risk and compliance challenges IT? Tech resilience definitely occupies our mind space even at the board level, whether we are doing enough. For a customer, the system should be available 24X7 without any disruption and reduced unscheduled downtime. It is complex, given the legacy systems and dependencies on various vendors and the fintechs. We have created a Resiliency Operation Centre to observe the behaviour of the systems, or hardware or servers, or behaviour of applications. The aim is to anticipate the problem much before it occurs. So it is more like a proactive observability of various systems which we work on.
Time of India
3 days ago
- Business
- Time of India
There is scope for a 25-bps repo cut in 2025... RBI will look at data, aid growth, says SBI MD Rama Mohan Rao Amara
Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Surplus liquidity is a 'pleasant problem' for State Bank of India (SBI), Rama Mohan Rao Amara, MD, International Banking, Global Markets and Treasury, tells ET's Joel Rebello and Sangita Mehta. He oversees a ₹66-lakh-crore balance sheet at India's most-valued government lender as head of its treasury. SBI expects another quarter-point reduction in policy rate this calendar year, Amara acknowledged that mobilising deposits is a tough task when depositors look for higher returns in a falling interest rate scenario, even as geopolitics, digital fraud and imported inflation remain key is a pleasant problem to have from a situation of running into a deficit only a few months ago. A lot of credit goes to the Reserve Bank of India (RBI) that from a deficit, we have moved to a system-level surplus with ₹9 lakh crore of durable liquidity. Short term rates are plummeting after the cuts. The change in stance by the RBI (to neutral) was surprising, indicating long-term rates are here to stay and this has led to a steepening of the curve. For a long time, long-term yield was almost flat and in certain sections inverted. We expect the short term rates to still come down further, with the long term moving sideways. We expect the ten year to be in a broad range of 6.1% to 6.4% and the rupee to be in the ₹84 to ₹86 per dollar transmission is still playing out. Year after year, loans linked to EBLR ( External Benchmark Linked Lending Rate ) have increased. The portfolio which is linked to MCLR (Marginal Cost Based Lending Rate) and other rates will slowly witness the transmission. So when transmission is complete, if inflation plays out as expected, the RBI may look at the data points and definitely there is further scope for a 25 basis point cut in repo this calendar year, and that is our house view factors like a normal monsoon-and certainty on the trade front. These are all triggers for them (RBI) to take a call. It gives them room or the manoeuvrability to aid the growth as well. I think the next decision on rate cut will be more data based. The front loading has given them enough time to observe how the system is behaving. So they will have the benefit of looking at the data, and of course, they will take measures to aid the been a challenge for the last few quarters. Every bank is prioritising deposit growth in face of competition from mutual funds or the insurance companies. Banks have to adopt a multi-pronged approach in improving customer engagement, creating innovative products which is possible thanks to technology advancement and use of AI-ML. You have to customise and even with a hyper personalisation where you make the right offer at the right time to a customer. That kind of hyper personalisation is possible thanks to technology advancement and use of AI-ML. You have to sweat all your channels, retail franchise, digital channel, or third party ecosystem. Individuals also will have a propensity to lock into the fixed deposit rates now anticipating a decline in the interest have an active treasury looking for opportunities. We have an active corporate investment book, though not comparable to the loan book growth. On margins, we are working on two fronts, wherever opportunities are there, we invest in the corporate investments short term, and also working on how to reduce deposit on date, the total outstanding infrastructure bonds with SBI is ₹69,718 crore. We have a sizeable infra book to support infra bonds. But if we feel like that net of all the costs, that is a much cheaper option, we will go for difference between the dollar and rupee 10 year G sec has narrowed to 1.8% versus 3% a few quarters ago. Ample liquidity will incentivise corporates to tap the domestic market. For the ECB, without a natural hedge you are running into risks. But some NBFCs want to diversify their resource base, so they will be looking at ECB. But as on date, if you ask me, there is a more incentive for the corporates to tap into their domestic rupee because of ample resilience definitely occupies our mind space even at the board level, whether we are doing enough. For a customer, the system should be available 24X7 without any disruption and reduced unscheduled downtime. It is complex, given the legacy systems and dependencies on various vendors and the fintechs. We have created a Resiliency Operation Centre to observe the behaviour of the systems, or hardware or servers, or behaviour of applications. The aim is to anticipate the problem much before it occurs. So it is more like a proactive observability of various systems which we work on.
Mint
22-06-2025
- Business
- Mint
RBI's rate cut may not bring immediate EMI relief for all borrowers
The Reserve Bank of India (RBI) has cut the repo rate by 50 basis points (bps) and the cash reserve ratio (CRR) by 100 bps, raising hopes among borrowers of lower EMIs. But rate cuts by the central bank don't automatically translate into immediate relief for all loan categories. The actual transmission, whether faster, slower, or none at all, will depend on multiple factors, including the type of loan, when it was taken, the lending institution, and the benchmark it is linked to. Fixed or floating: the nature of your loan matters Certain loan categories — particularly personal loans and credit card debt — are typically offered at fixed interest rates. The rate set at the time of disbursement remains unchanged through the tenure of the loan, regardless of RBI's policy moves. Read this | Mint Explainer: RBI cuts repo rate by 50 bps. How will it impact lenders and borrowers? 'Most lenders offer loans in these categories as fixed-rate loans. Then there are categories, which are more of a mixed bag. For example, loans such as car loans and loans against securities," said Adhil Shetty, chief executive officer of BankBazaar. To be sure, some public sector banks even offer personal loans with a floating rate option. When it comes to car loans or loans against securities, the interest rate may be fixed or floating. If floating, these are linked either to internal or external benchmarks set by the banks. Since 1 October 2019, all new floating-rate loans must be linked to external benchmarks. However, older loans are often tied to internal benchmarks. According to RBI's Annual Report 2024-25, 35.9% of floating-rate loans are still linked to the marginal cost of funds-based lending rate (MCLR), an internal this: How you can get a loan against an insurance policy Home loans are predominantly floating-rate products, while fixed-rate options are also available. Borrowers who took home loans after October 2019 are generally linked to external benchmarks, while older loans may still be tied to MCLR. This distinction is crucial in determining how quickly borrowers benefit from the RBI's latest repo cut. MCLR vs EBLR: how your benchmark affects transmission For loans linked to MCLR, the transmission is typically delayed due to reset cycles, which may occur annually or half-yearly depending on the bank. Even though the RBI provides the formula for calculating MCLR, banks apply their own internal cost structures to arrive at their minimum lending rates. 'While the formula for calculating MCLR is given by the RBI, it is an internal benchmark, which means it will vary across banks. Banks will use their internal costs and calculation of risks to decide their minimum lending rate under MCLR framework. The variables include cost of funds for the banks (deposits), other borrowings, return on net worth, operating costs, tenor premium (longer loan tenor would mean higher risk premium) and negative carry from RBI's cash reserve ratio," explained Joydeep Sen, corporate trainer and author. The CRR, the percentage of deposits banks are required to maintain with the RBI, results in negative carry because these funds typically earn lower returns. Banks are allowed to factor this into their MCLR calculations. By contrast, loans under the external benchmark lending rate (EBLR) regime, most commonly linked to RBI's repo rate, usually see faster transmission. The repo-linked lending rate (RLLR) adjusts more swiftly, typically on a quarterly reset this: How you can get loan against mutual funds without breaking it As the repo-linked lending rate (RLLR) is directly linked to RBI's repo rate, it will usually lead to full quantum of repo cut getting passed onto the borrowers and the transmission is likely to happen faster as the EBLR framework follows quarterly reset cycle. NBFC loans: more flexibility, less transmission certainty For borrowers with loans from non-bank financial companies (NBFCs), the picture is more complex. While NBFCs are regulated by RBI, they are not mandated to follow the benchmark frameworks applicable to banks. 'NBFCs have their internal models to determine their base rates. These rates are influenced by factors such as cost of funds, overhead costs and asset-liability mismatches," pointed out Jagadeesh Mohan, founder of EMI Saver and former PhonePe executive. For NBFCs, assets are the loans they have extended, and liabilities are funds borrowed from banks, debt markets, or depositors. Asset-liability mismatches occur when most borrowings are of short tenure, while loans extended have longer tenures. Also read: How stock market investors can use liquid ETFs to manage cash Additionally, NBFCs can set their own reset frequencies. Existing borrowers may not necessarily benefit from RBI's repo cut, or the impact may be limited depending on the lender's funding costs, competition, and business strategy. 'NBFCs with better credit ratings might be better placed to pass on the benefits of RBI's repo cut due to the lower cost of raising funds on account of their credit rating and better access to funds through their distribution channel," said Abhishek Kumar, a registered investment advisor and founder of SahajMoney.
Hindustan Times
10-06-2025
- Business
- Hindustan Times
RBI cuts repo rate by 100 bps in 2025, but home loan borrowers may have to wait for full benefit
The Reserve Bank of India (RBI) has cut the repo rate three times this calendar year, with two 25 basis point (bps) reductions in the first two Monetary Policy Committee (MPC) meetings. There were followed by a sharper 50 bps cut in the most recent policy. This brings the total rate cut to 100 bps, signalling the central bank's strong intent to stimulate credit demand and revive economic activity by lowering borrowing costs. This development should come as positive news for home loan borrowers, as it is expected to reduce EMIs, especially for those with floating-rate loans. However, despite the RBI's clear direction, banks and lending institutions often delay or partially pass on the benefits of rate cuts. As a result, many borrowers, particularly those with floating-rate loans, may experience a lag in relief, as the rate transmission is not always immediate or complete. So, it will be a while before the lower rates are passed on to the new borrowers. In fact, the 50 bps cut has not been passed on to new borrowers, and mostly PSU banks have passed on a rate cut of up to 40 bps in some cases. Below is a list of banks that are offering home loan interest rates of 8% or less. 'The lowered CRR limits are expected to boost transmission and new borrowers should also be able to avail low rates soon,' says Adhil Shetty, CEO BankBazaar, a fintech portal. So, it will be a while before reduced home loan rates are passed on to new borrowers, which could be a few days to a week or more. There are reasons behind why it takes time for banks to pass on the rates. Historically, many loans in India have been linked to the Marginal Cost of Funds-Based Lending Rate (MCLR). This system incorporates a bank's internal cost of funds, operational costs, and risk premiums. 'As a result, even when the RBI reduces the repo rate, banks may not immediately revise MCLR since it's based on their own cost structures rather than the RBI's benchmark rate,' says Raoul Kapoor, co-CEO, Andromeda Sales and Distribution. So, if your loan is still linked to the Base Rate or Marginal Cost of Funds-based Lending Rate (MCLR), this rate cut may not benefit you immediately as these benchmarks are slower to respond to policy changes compared to the repo-linked loans that reflect the revision within three months. 'So if you are on an older benchmark, this is the time to consider a switch. A refinance at 100bsp lower will help you save close to ₹4 lakh on a ₹25 lakh outstanding. If you retain your higher EMI, your savings will be even higher,' says Shetty. Also Read: Buying your first home? Netizens say it's like an arranged marriage—Heavy on emotions and financial pressure On the other hand, repo rate-linked loans, introduced more widely in 2019, are directly pegged to the RBI's repo rate. In these loans, any change in the repo rate should be passed on more transparently and quickly, depending on the reset clause. However, not all borrowers have shifted to this model, and many older loans still remain on MCLR or base rate systems. 'Despite these challenges, with a total repo rate cut of 100 basis points this year, there is growing expectation that banks will begin passing on the full benefit to borrowers—especially for home loans. This is also crucial to align with the RBI's objective of stimulating demand and supporting economic growth through monetary easing,' says Kapoor. Once all the benefits are passed on, this is how home loan borrowers will benefit. Anagh Pal is a personal finance expert who writes on real estate, tax, insurance, mutual funds and other topics
