Mumbai, April 10 : The government-owned Bank of Baroda on Thursday announced the immediate transmission of the Reserve Bank of India's (RBI) policy rate cut to its customers.

The public sector lender said it has 'reduced its external benchmark-linked lending rates for loans catering to Retail and MSME segments, ensuring that customers benefit quickly from the RBI's monetary policy move.'

Additionally, the Bank's overnight marginal cost of funds-based lending rate (MCLR) stands at 8.15 per cent, and its one-year MCLR is 9 per cent, which the bank said is among the most competitive in the industry.

This move is aimed at providing credit at affordable rates to individuals and businesses, supporting broader economic growth and financial inclusion, the Bank said.

RBI Governor Sanjay Malhotra on Wednesday announced a 25 basis cut in the policy rate from 6.25 per cent to 6 per cent and a change in monetary policy stance from neutral to accommodative to accelerate economic growth.

The RBI Governor said the decision to cut the repo rate has been taken unanimously by the monetary policy committee, keeping in mind the macroeconomic and financial conditions and outlook.

A lower policy rate is aimed at bringing down interest rates on bank loans, which makes borrowing easier for consumers as well as businesses, resulting in higher consumption and investments in the economy, leading to higher growth. However, the effectiveness of this rate cut will largely hinge on how quickly and efficiently commercial banks pass on the benefits to borrowers.

With the RBI's 50 basis points cumulative reduction in policy rates since February this year, transmission of the rate cut by banks is expected in the coming quarters, according to an SBI report.

The report points out that following RBI's 25 basis cut in repo rate in February, public sector banks reduced deposit rates by 6 basis points, and foreign banks reduced 15 basis points, while private banks increased the rate by 2 basis points. The analysis of the weighted average lending rate (WALR) on fresh loans versus the repo rate reveals that WALR for public sector banks and scheduled commercial banks SCBs closely follow the adjustments in the policy rate, implying an effective and timely transmission mechanism.

/IANS