State-run lender Indian Overseas Bank has announced a reduction in its overnight marginal cost of funds-based lending rate (MCLR) by 5 basis points to 7.95%, effective January 15, 2026. The decision was taken by the bank's Asset Liability Management Committee (ALCO) during a meeting held on January 13, 2026, following a comprehensive review of MCLR calculations as of January 10.

MCLR Rate Structure

While the overnight MCLR has been reduced, all other tenor rates remain unchanged. The current MCLR structure across different time periods is as follows:

Impact on Borrowers

The rate revision will have limited impact on existing borrowers, as most loans are linked to longer-term MCLR tenors that remain unchanged. New borrowers can expect interest rates ranging between 8.30% and 8.85% depending on their chosen loan tenure. The bank has indicated that the revised rates will remain in force until further review.

Recent Corporate Developments

In a separate development, the government recently launched an Offer For Sale (OFS) to reduce its stake in the lender. The OFS plans include selling up to 2% of IOB's outstanding equity, with a greenshoe option for an additional 1% stake sale.

Market Performance

Shares of Indian Overseas Bank closed at ₹35.48 on Tuesday, registering a gain of 0.54% from the day's opening price on the NSE. The rate adjustment announcement was made through a regulatory filing to stock exchanges.

Indian Overseas Bank has announced a reduction in its overnight Marginal Cost of Funds based Lending Rate (MCLR) by 5 basis points, bringing it down to 7.95% effective from January 15, 2026. The decision reflects the bank's ongoing efforts to optimize its lending rates in response to current market conditions.

ALCO Decision and Implementation

The bank's Asset Liability Committee (ALCO) made this decision during its meeting held on January 13, 2026, after reviewing the MCLR workings as on January 10, 2026. The revised rates will remain effective until the next review cycle, providing clarity to borrowers and the market about the bank's lending rate structure.

Revised MCLR Structure

The comprehensive revision shows a targeted approach to rate adjustment, with changes limited to the shortest tenor while maintaining stability across other periods:

Rate Structure Analysis

The selective reduction demonstrates the bank's strategic approach to interest rate management. While the overnight MCLR has been reduced by 5 basis points from 8.00% to 7.95%, all other tenor rates across different periods remain unchanged. The rate structure shows an upward curve from overnight to longer tenors, with rates ranging from the revised 7.95% for overnight lending to 8.85% for three-year MCLR.

Market Impact and Borrower Benefits

The reduction in overnight MCLR is expected to provide relief to borrowers whose loan rates are linked to this benchmark. This adjustment comes at a time when banks are carefully balancing their cost of funds with competitive lending rates. The unchanged rates for other tenors suggest a measured approach to rate revision, maintaining stability for medium to long-term lending products.

Regulatory Compliance

The announcement was made under Regulation 30 of SEBI (LODR) Regulations, 2015, ensuring transparency and timely disclosure to stakeholders. The bank has communicated the changes to both BSE and NSE, where it trades under scrip codes 532388 and IOB respectively, maintaining compliance with listing requirements and keeping investors informed about significant operational decisions.