ICICI Bank – the second largest private sector lender of the country - has reduced the benchmark lending rate - marginal cost of funds-based lending rate (MCLR) by five basis point across loan tenures. The new rates will be effective from January 1, 2021, the bank informed on its website. Equated monthly instalments of home, auto loan will fall following the rate reduction.

Following the rate cut, the one-year MCLR of the bank, to which most retail loans like home loan and auto loans are linked, is now 7.30 per cent, whereas for six months it now stands at 7.25 per cent. For three months the rate is 7.10 per cent and for overnight and one-month tenure the rate stands at 7.05 per cent.

The MCLR is the minimum interest rate that a bank can lend which is linked to the marginal cost of funds of a bank.

Reserve Bank of India's norms require banks to review their lending rates every month, based on the marginal cost of funds.

The rate cut by ICICI Bank comes even after RBI has not changed the key policy rate or the repo rate in the last three monetary policy reviews. The next policy review is due on February 2021.

Shares of ICICI Bank on Friday were trading lower by 0.82% at 530.50 on the Bombay Stock Exchange at around 12.40 pm.

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