Joining State Bank, PNB and several others, ICICI Bank today also cut the base lending rate by 0.70 per cent making home, auto and other loans cheaper.

The bank has reduced marginal cost of funds based lending rate (MCLR) by 0.7 per cent to 8.20 per cent for 1-year tenure, ICICI Bank said in a statement.

Similar cut has been made effective in other tenures, the bank said.

"The revised MCLR benchmarks effective from January 3," the bank said.

The reduction in interest rate will bring down interest rate on home and other loans linked to one-year MCLR by similar percentage point.

The one-year MCLR of SBI was reduced to 8 per cent from 8.90 per cent yesterday.
Banks are cutting lending rates after spurt in deposits following demonetisation of old high denomination currency notes of Rs 500/1,000.

The reduction in lending rate may prompt increase in credit offtake which has moderated substantially putting burden on balancesheet of banks.

Besides ICICI Bank, other lenders like Kotak Mahindra Bank, Dena Bank, Bandhan Bank, Andhra Bank and Oriental Bank of Commerce also slashed MCLR.

Yesterday, SBI, PNB and Union Bank of India had reduced MCLR rate.

Banks have switched to MCLR as their new benchmark lending rate from June last year, replacing the base rate system for new borrowers. It is calculated on the marginal cost of borrowing and return on net worth for banks. It was introduced by RBI to ensure fair interest rates to borrowers as well as banks.

MCLR also seeks to address the regulator's primary objective of expediting monetary policy transmission along with augmenting uniformity and transparency in the calculation methodology of lending rates. MCLR rates are revised every month.