Axis Bank cuts MCLR by up to 70 bps

MUMBAI: Country's third biggest private sector lender Axis Bank today cut its interest offering by up to 0.70 per cent, following similar moves by all the major players in the system due to high liquidity post demonetisation.

The Shikha Sharma-led bank cut its marginal cost of funds based lending rate (MCLR) for one year tenure-- which serves as the benchmark for a slew of loans including home loans--by 0.65 per cent to 8.25 per cent, it said in a statement.

The new rates, decided by the bank's asset liability committee which met today, are effective from January 18.

"We have passed the entire benefit accruing from a surge in the current and savings account and a drop in deposit rates to the borrowers," its head of treasury Shashikant Rathi said.

He added that the bank had effected a cut of between 0.75-1 per cent in its deposit offerings right after the November 8 government announcement to scrap Rs 500 and Rs 1,000 notes, which has led to a surge in the low-cost current and saving account deposits.

When asked about his outlook, Rathi said there is no more room for a cut at present and any further action hinges on events like a cut by RBI in its key rates or a surge in low-cost deposits.

The bank had also cut its ase rate by over 0.10 per cent earlier this month. MCLR replaced the base rate in April last year for a better transmission of the RBI's policy actions in borrower costs.

He said 30 per cent of the bank's loan book is on the MCLR-based system, but the number is very dynamic as more people are switching to the lower-priced MCLR rates at a faster pace.

The bank's overnight MCLR has come down by a similar 0.65 per cent to 7.90 per cent while the highest cut of 0.70 per cent has been effected in the 3 month and 6 months MCLR which has been reviewed to 8.05 per cent and 8.15 per cent, respectively.

Country's largest lender SBI led the pack by first announcing a very sharp reduction of 0.90 per cent in its MCLR on January 2. Its one year MCLR stands at 8 per cent, while the overnight MCLR is 7.75 per cent.