PNB MCLR Cut: The increase or decrease of MCLR by banks affects the new borrowers as well as those customers who have taken loans after April 2016.
There is news of relief for Punjab National Bank (PNB) customers. PNB has reduced the one-year MCLR (Marginal Cost Lending Rate) by 0.05 per cent to 7.30 per cent. The revised MCLR of the bank came into effect from June 1. For customers who have taken a loan on MCLR, the loan can be cheaper. In such a situation, the EMI of home loan and auto loan can be reduced for the customers taking loan on MCLR.
PNB said that for the period of six months and three months, the MCLR has been cut by 0.10 percent and after this cut the interest rate will be 7 percent and 6.80 percent respectively. There has been no change in the MCLR for a period of one day, one month and three years. Actually, banks set a minimum interest rate for lending. Earlier this was the base rate. After this, banks took out the new form of loan MCLR.
What is MCLR?
The effect of increasing or decreasing the MCLR by banks affects the new borrowers apart from those customers who have taken loans after April 2016. Before April 2016, the minimum rate fixed by the Reserve Bank for giving loans was called Base Rate. That is, banks could not give loans to customers at a rate lower than this. MCLR came into effect from 1st April 2016 in the banking system and it became the minimum rate for loans. That is, after that the loan was given on the basis of MCLR only.
It should be noted here that the reset period in MCLR home loan is 12 months while many banks also provide a reset period of 6 months. When the loan period completes 6 months or 1 year, changes have been made in EMI according to the bank’s MCLR. Usually RBI takes a decision on the repo rate every 6 months. Therefore, any change in the repo rate does not have an immediate effect on the home loan. Due to time lag, they can be called a fix loan for 1 year.
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