UCO Bank, one of the largest public sector banks in the country, has announced a cut in its Marginal Cost of Funds-Based Lending Rate (MCLR) for all tenures from June 10, 2025. The bank has made a significant reduction of 0.10 percent in MCLR. This announcement comes just after the Reserve Bank of India (RBI) cut the repo rate by 50 basis points.
RBI has cut a total of 75 basis points with three consecutive cuts, after which the repo rate has come down from 6 percent to 5.50 percent. This move of UCO Bank has brought good news for the customers because now taking many types of loans like Home Loan, Car Loan, and Personal Loan will become even more affordable.
How much reduction in MCLR
UCO Bank has reduced MCLR rates for different periods, which will directly benefit the customers.
Overnight MCLR:- This rate has come down by 0.10 percent to 8.15 percent, which was earlier 8.25 percent.
1 Month MCLR:- Now it has become 8.35 percent, which was earlier 8.45 percent.
3 Month MCLR:- This rate will now be 8.50 percent, which was earlier 8.60 percent.
6 Month MCLR:- This rate will now be 8.80 percent, which was earlier 8.90 percent.
One Year MCLR:- It will come down from 9.10 percent to 9 percent. This rate is especially important because most retail loans such as home loans are linked to a one-year MCLR.
What is MCLR, Why is it important
Let us tell you what MCLR is and why it is important. The full form of MCLR is the Marginal Cost of Funds-Based Lending Rate. This is the minimum rate below which the bank is not allowed to lend. Simply put, it is the minimum cost of lending by the bank.
The Reserve Bank of India introduced the MCLR system to determine interest rates for loans on April 1, 2016. Its purpose was to bring transparency in lending rates of banks and ensure that the benefits of changes made in policy rates by RBI reach the customers quickly.
How MCLR works
MCLR is based on the internal costs of the bank, which include the cost of funds, cost incurred on Cash Reserve Ratio (CRR), operating costs, and tenor premium. When RBI cuts the repo rate, it becomes cheaper for banks to raise funds, allowing them to reduce their MCLR rates and pass on the benefits to customers.
What is the impact on other banks
After this move by UCO Bank, it is expected that other public and private sector banks will also announce a cut in their MCLR rates soon. The continuous reduction in repo rate by RBI will have an impact on the entire banking sector, which will make loans cheaper across the country and boost the economy.