MUMBAI: Banks led by public sector lenders have started revising their lending rates following the RBI’s 50 basis point repo rate cut. However, for a change, old borrowers may benefit more than new ones, as banks are likely to tweak the spreads on home loans, which were already competitive in the quest for market share.Bank of Baroda has reduced its repo-linked lending rate (RLLR) by 50 basis points with effect from June 7. The bank’s RLLR now stands at 8.15%. Punjab National Bank has cut its RLLR by 50 basis points to 8.35%, effective June 9, while keeping its MCLR unchanged. Bank of India has also reduced its Repo-Based Lending Rate by 50 bps to 8.35% from June 6.

UCO Bank trimmed both its MCLR and RLLR. The bank cut its RLLR by 50 bps to 8.30% from June 9 and lowered its MCLR by 10 bps across tenures. Its one-year MCLR now stands at 9%.HDFC Bank, meanwhile, reduced its MCLR by 10 basis points across tenure, starting June 7. With the reduction, the overnight and one-month rates are down by 10 basis points to 8.9%.According to RBI norms, floating-rate loans must be reset in line with the benchmark repo rate. This means existing borrowers will see an automatic reduction in rates. However, new borrowers may not get the full benefit, as banks are expected to adjust the spread they charge over the repo rate to protect margins. In the case of Bank of Baroda, home loan rates for new borrowers after the revision start at 8%.To preserve profitability, banks are also expected to lower returns on fixed deposits, especially with fresh liquidity being injected into the system. This could make FDs less attractive to savers.The reason why old borrowers will benefit more than new ones is that because of intense competition, many lenders particularly those who were challenging markets leaders, were offering cheaper rates. Among public sector banks, Bank of India, Bank of Maharashtra, Central Bank of India and Union Bank of India were offering loans at 7.85% for up to Rs 30 lakh even before the rate cut.Canara Bank, Indian Bank, Indian Overseas Bank and UCO Bank were offering home loans at 7.90%, with Canara’s rate applicable for loans above Rs 75 lakh and others for loans up to Rs 30 lakh. Until last week, South Indian Bank had the lowest rate among private lenders at 8.30% for loans up to Rs 30 lakh. Karur Vysya Bank followed at 8.45%, while PNB Housing Finance and Tamilnad Mercantile Bank offered 8.50%. Bandhan Bank, Axis Bank and Karnataka Bank had rates of 8.66%, 8.75% and 8.78%, respectively.