UCO Bank, Bank of India reduce lending rate after RBI’s repo rate cut

After the Reserve Bank of India’s (RBI) decision to cut its repo rate on Wednesday, two state-run lenders – Bank of India and UCO Bank – announced 25 basis points reduction in lending rates.

The move is likely to benefit existing and new borrowers.

In separate regulatory filings, Bank of India and UCO Bank said that the rate revision has been done following the RBI’s reduction in the short-term lending rate (repo rate) earlier in the day.

Bank of India said its new Repo Based Lending Rate (RBLR) now stands at 8.85 per cent as compared to 9.10 per cent earlier. The new rate would be effective from Wednesday.

UCO Bank slashed its repo linked rate to 8.8 per cent, effective Thursday.

Other lenders are also expected to slash lending rates soon.

RBI Monetary Policy

The Monetary Policy Committee (MPC), consisting of three central bank members and an equal number of external members, voted unanimously to cut the repurchase or repo rate by 25 basis points to 6 per cent.

It had reduced rates by an equal measure in February — the first cut since May 2020.

The repo rate is the rate at which the RBI lends money to banks to meet their short-term funding needs.

With a 25 bps cut in the repo rate, all external benchmark lending rates (EBLR) linked to it will come down. And if the banks fully pass on this to the borrowers, equated monthly instalments (EMIs) on home, auto and personal loans will decline by 25 bps.

The RBI also lowered its estimate for economic growth to 6.5 per cent for 2025-26 fiscal year from 6.7 per cent earlier.

Co-lending

The RBI on Wednesday proposed to expand the scope for co-lending beyond priority sector loans.

It also proposed to issue a generic regulatory framework for all forms of such arrangements among banks and NBFC, with a view to cater to the credit needs of a wider segment in a sustainable manner.