UCO Bank, a major public sector bank in India, has announced a 0.10% reduction in its Marginal Cost of Funds-Based Lending Rate (MCLR) across all tenures, effective June 10, 2025. This move follows the Reserve Bank of India’s (RBI) decision to cut the repo rate by 50 basis points, bringing the total reduction to 75 basis points since the RBI’s previous three consecutive cuts. As a result, the repo rate has decreased from 6% to 5.50%. This reduction in MCLR by UCO Bank is expected to make various types of loans, such as home loans, car loans, and personal loans, more affordable for customers.
The MCLR rates for different periods have been reduced as follows: overnight MCLR has decreased from 8.25% to 8.15%, one-month MCLR has decreased from 8.45% to 8.35%, three-month MCLR has decreased from 8.60% to 8.50%, six-month MCLR has decreased from 8.90% to 8.80%, and one-year MCLR has decreased from 9.10% to 9.00%. The one-year MCLR is particularly significant, as most retail loans, including home loans, are linked to this rate.
MCLR, or Marginal Cost of Funds-Based Lending Rate, is the minimum rate below which a bank is not allowed to lend. It was introduced by the RBI on April 1, 2016, to bring transparency to lending rates and ensure that the benefits of policy rate changes are passed on to customers quickly. MCLR is based on a bank’s internal costs, including the cost of funds, cash reserve ratio, operating costs, and tenor premium. When the 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.
The reduction in MCLR by UCO Bank is expected to have a ripple effect on the entire banking sector, with other public and private sector banks likely to follow suit and announce similar cuts in their MCLR rates. This, in turn, will make loans cheaper across the country and boost the economy. The continuous reduction in repo rate by the RBI is expected to have a positive impact on the economy, making borrowing more affordable for individuals and businesses. Overall, the reduction in MCLR by UCO Bank is a welcome move for customers, and it is expected to have a positive impact on the banking sector and the economy as a whole.