Banks start reducing loan rates after RBI repo cut

MUMBAI: Several banks revised their external benchmark lending rates after RBI cut repo rate by 25 basis points to 6% on Wednesday. Indian Bank said it will reduce its repo-linked benchmark lending rate (RBLR) to 8.7% from 9.05%, effective April 11. PNB has cut its repo-linked lending rate (RLLR) to 8.85% from 9.1%, effective April 10. Bank of India has revised its RBLR to 8.85% from 9.1%, with the change taking effect from April 9.

The monetary policy committee voted unanimously for a rate cut and to shift the policy stance to accommodative, with RBI stating that it would maintain surplus liquidity in the system. RBI requires banks to link all floating rate loans to an external benchmark. The repo rate cut is expected to reduce lending rates, but may compress banks' net interest margins, since the cost of funds has not declined at the same pace.