Indian Overseas Bank Reduces Overnight MCLR by 5 Basis Points to 7.95%

Indian Overseas Bank has announced a reduction in its overnight marginal cost of funds-based lending rate (MCLR) by 5 basis points, marking the latest adjustment in the state-owned lender's pricing strategy. The decision comes amid an ongoing government stake sale and reflects the bank's continued focus on competitive lending rates.

MCLR Reduction Details

The bank's Asset Liability Management Committee approved the rate reduction during a meeting held on January 13, following a comprehensive review of MCLR workings as of January 10. The decision was communicated through a regulatory filing to stock exchanges.

Parameter:	Details
Previous Overnight MCLR:	8.00%
Revised Overnight MCLR:	7.95%
Effective Date:	January 15
Reduction:	5 basis points
Other MCLR Tenors:	No change

The bank had last revised its MCLR in December, and the revised rates will remain in force until further review.

Impact on Borrowers

The rate revision is expected to have limited impact on existing borrowers, as most loans are linked to longer-term MCLR tenors that remain unchanged. However, new borrowers stand to benefit from the adjustment.

New Borrower Rate Range:

Interest rates: 8.30% to 8.85%
Variation based on loan tenure selected
Applicable for fresh loan applications

One basis point equals 0.01%, making this a modest but meaningful adjustment for new lending activities.

Government Stake Sale

In a separate development, the government has launched an Offer For Sale (OFS) to reduce its holding in the lender. The divestment plan includes specific parameters for equity reduction.

OFS Component:	Details
Base Sale:	Up to 2% of outstanding equity
Greenshoe Option:	Additional 1%
Total Potential Sale:	Up to 3% of equity

This stake sale represents part of the government's broader divestment strategy for public sector banks.

Market Performance

Indian Overseas Bank shares closed at ₹35.48 on Tuesday, registering a gain of 0.54% from the day's opening price on the NSE. The MCLR adjustment announcement was made after market hours through the regulatory filing, positioning the stock for potential investor attention in subsequent trading sessions.

1 Day	5 Days	1 Month	6 Months	1 Year	5 Years
+0.54%	-2.97%	-3.97%	-8.56%	-21.76%	+213.30%

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:

Tenor:	Rate (%)
Overnight:	7.95%
One-month:	8.30%
Three-month:	8.40%
Six-month:	8.65%
One-year:	8.80%
Two-year:	8.80%
Three-year:	8.85%

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.