Punjab National Bank Updated MCLR Rate on 14 Feb, 2023
Current MCLR rate of Punjab National Bank ranges from 7.90% to 8.70%. Punjab National Bank revises its MCLR rates on a monthly basis and benchmark its interest rates for home loan and other loans to MCLR rates of different tenor. Update date Feb 01, 2023
|Tenure wise MCLR||Punjab National Bank MCLR Rate Today|
|Punjab National Bank Base Rate||9.00%|
MCLR: Period of Applicability
|Type of MCLR||Period of Applicability|
|Overnight MCLR||1 day & above but less than 1 month|
|One-Month MCLR||1 month & above but less than 3 months|
|Three-Month MCLR||3 months & above but less than 6 months|
|Six-Month MCLR||6 months & above but less than 1 year|
|One-Year MCLR||1 year & above but less than 2 years|
|Two-Year MCLR||2 years & above but less than 3 years|
|Three-Year MCLR||3 years & above|
The Reserve Bank (RBI) is linking the base rate for loans given by banks to the MCLR from April 1, 2018. Hence, the base rate will automatically increase or decrease along with the MCLR without any specific action required for adjustment. This will be very beneficial for the home loan borrowers whose rates (EMIs) are still linked to the base rate.
What is MCLR (Marginal Cost of funds based Lending Rate)?
MCLR (Marginal Cost of funds based Lending Rate) is the minimum rate of interest declared by any bank below which the bank cannot offer any kind of loan. It replaces the Base Rate which used to prevail before April 1, 2016. The Base Rate was introduced by RBI in July 1, 2010 to regulate the lending systems by the banks.
Difference Between MCLR & Base Rate
|Basis of Difference||MCLR||Base Rate|
|Year of Introduction||2016||2010|
|Definition||Reference rate or internal benchmark for the banks||Minimum rate of interest at which banks offer loan|
|Who sets?||Set by Banks||Set by the RBI|
|Frequency||Revised almost every month||Does not revise every month|
|Transparency||More Transparent||Less Transparent|
|Dependency on Repo Rate||Dependent on the repo rate changes||Independent of the repo rate changes|
|Applicability||Applicable for Banks only||Applicable for other financial institutions also|
|Basis of Calculation||Calculated based on current cost of funds||Calculated based on average cost of funds|
|Cost of Loan||Loan linked to MCLR has lower interest rate cost as compared to that of base rate||Loan linked to Base Rate has higher interest rate cost as compared to that of MCLR|
How Reset Period Makes MCLR linked rate Fixed for a Year?
Banks generally offer home loans linked to their one year MCLR which is reset yearly. If a person has borrowed a home loan in August 2017 and the RBI cuts repo rate in October 2017 and bank also brings down their one year MCLR in October 2017, then also, the effect of decrease in MCLR for the borrower will be seen in August 2018 only due to one year reset period. Hence, Individual borrowers may have to wait slightly longer to see the effect on their loans' EMIs because of the reset period specified in the agreement.
Is it Beneficial for Home Loan Borrowers to Shift from Base Rate to MCLR Rate?
MCLR (Marginal Cost of funds based Lending Rate) is the minimum rate of interest below which the bank cannot lend the loan, with an exception of certain cases as approved by the RBI.
It will be beneficial for them to switch to MCLR linked rate if the difference between what they are paying (under base rate) and what the bank is offering (under MCLR) is significant. So they must switch to MCLR linked rates, if outstanding loan is high and the remaining tenure is also long.
In that situation, Base Rate Borrowers have following two options:
(1) Switch to MCLR linked home loan with the same bank: It is beneficial, in case the bank is charging a nominal switching fee such as 0.50% or less on outstanding amount.
(2) Balance Transfer the loan to another bank on MCLR: It is feasible, if new bank has waived off processing fee (which they generally do in order to attract the customer and increase their business) or is charging very less processing fee and legal and transfer costs.
The borrower must compare both the above-mentioned options and opt for the one which is more beneficial to them in terms of money saved. It will result not only in reduction of future EMIs but also a huge amount of interest will be saved during remaining tenure.
One main point to consider before taking the decision of switching from base rate to MCLR is that it will depend greatly on the cost of switching and the actual benefit received after the switch. Switching cost may be in the range of Rs 5,000 to Rs 20,000 depending upon banks. Some banks do not charge a switchover fee and allow the base rate borrowers to switch from base rate to MCLR without paying any charges.
Quick Watch List
- The Reserve Bank (RBI) is linking the base rate for loans given by banks to the MCLR from April 1, 2018. Hence, the base rate will automatically increase or decrease along with the MCLR without any specific action required for adjustment. This will be very beneficial for the home loan borrowers whose rates (EMIs) are still linked to the base rate.
- Base rates are higher than MCLR.
- MCLR is applicable for Banks only and home loans offered by NBFCs or HFCs don't have any concept of MCLR.
- The tenor of MCLR will be chosen by the banks. The reset period can be different as chosen by the bank such as one month, three months, six months or one year.
- MCLR linked interest rates will be beneficial to borrowers whenever interest rate cycle is in a downward regime.
- Banks have different MCLR for different maturity of loans.
What is the Markup or Spread over MCLR?
The Markup or Spread for a MCLR linked loan borrower is an important factor which the banks charge over and above the MCLR. The actual home loan interest rate can either be equal to the MCLR or can have a Markup or Spread but it can never be lower than the MCLR in any home loan case. Apart from loan Reset Date, Spread over MCLR also impacts the actual interest outgo of the borrower.
For example, if a bank's 1-Year MCLR stands at 8% with a spread of 0.40% in home loan segment then the interest rate applicable to the home loan borrower will be MCLR+spread i.e. 8% + 0.40% which is equal to 8.40%.
In most of the loan cases, the spread or the markup is made a part of the loan agreement and hence remains fixed for the entire tenure of the loan. Some of the banks retain the right to change the spread in some cases that is why it is advised to the customers to go through the loan agreement thoroughly and carefully before signing it.
Which Types of Loans are not Linked to MCLR?
Banks are allowed to offer all categories of loans linked to MCLR no matter they are fixed interest rate loans or floating interest rate loans. However, fixed interest rate loans with tenure above 3 years and special loan schemes offered by the government are not linked to MCLR.
Punjab National Bank Historical MCLR
Compare Punjab National Bank MLCR Rates with Other Banks
MCLR Latest News - Feb 2021
16 Oct 2020: Punjab and Sind Bank revises its MCLR for different tenors with effect from Oct 16, 2020.
9 Oct 2020: State-owned Bank of Baroda trims MCLR by 5 basis points on various tenor w.e.f. Oct 12, 2020.
1 Oct 2020: India's second largest Private Sector lender ICICI Bank cuts its MCLR on various tenors by 5 bps with effect from Oct 1, 2020.
1 Oct 2020: Bank of India cuts its MCLR for different tenors by 5 bps with effect from Oct 1, 2020.
19 Sep 2020: State Bank of India (SBI) informs that there will be a 100% waiver in the processing fee for all borrowers who apply for car, gold, and personal loan through YONO App.
04 Sep 2020: State Bank of India (SBI) has reduced the MCLR reset frequency from 1 year to 6 months for retail loans for extending the benefits of a reduction in the interest rate to the retail borrowers without waiting for a year. This new reset frequency of 6 months will be applicable for new loans.
14 Aug 2020: Central Bank of India slashes its MCLR by 5 bps across tenors from August 15.
10 Aug 2020: Indian Overseas Bank (IOB) cuts its MCLR by 10 basis points across all tenors from August 10.
9 Aug 2020: Canara Bank reduces MCLR by up to 30 bps across various tenors.
7 Aug 2020: HDFC Bank, the country's largest private sector bank, cuts its MCLR by 10 bps across tenors from August 7.
4 Aug 2020: ICICI Bank slashes its MCLR by 5 bps across tenors.