The country's fourth biggest private sector lender Kotak Mahindra Bank on Monday slashed its lending rates up to 0.45 per cent, a day after SBI cut its rate offering steeply.
The bank has cut marginal cost of funds based lending rate by 0.20 to 0.45 per cent across tenors, it said in a statement.
The one year MCLR, which is used as the benchmark for a bulk of long-term consumer loans, has been reduced by 0.20 per cent while the maximum cut of 0.45 per cent has been effected in the one month and three month MCLRs.
After revision, the one-year MCLR comes down to 9 per cent, while the one month and three month MCLRs will be 8.25 per cent and 8.40 per cent, respectively.
The overnight MCLR which is generally a bank's most aggressive MCLR offering has been cut by 0.40 per cent to 8.20 per cent.
The revised rates are applicable from January 1, 2017 onward, the statement said.
A day after Prime Minister Narendra Modi exhorted banks to prioritise lending towards poor and lower middle class, SBI cut its MCLR by a steep 0.90 per cent, setting the stage for its smaller peers to follow-suit.
Some smaller banks like State Bank of Travancore and IDBI Bank had already announced MCLR cuts in the last week of December.
"While respecting the autonomy of banks, I appeal to them to move beyond their traditional priorities and keep the poor, lower middle class and middle class at the focus of their activities," Modi had said.
Banks have moved to MCLR as their new benchmark lending rate from April 2016, replacing the base rate system for new borrowers.
It is calculated on the marginal cost of borrowing and return on net worth for banks. It was introduced by RBI to ensure better transmission of its policy actions.