Bank of Baroda and Union Bank of India have increased their marginal costs of funds-based lending rates (MCLRs) on loans following an increase in the repo rate by 0.25 per cent by the Reserve Bank of India (RBI ). The MCLR rate hike will make loans more expensive.
Canara Bank and Punjab National bank have increased the Repo Linked Lending Rate (RLLR) from February 9, 2023.
MCLR is the minimum rate at which banks can lend. MCLR follows an internal benchmark where banks set interest rates based on their cost of arranging funds for lending. RLLR, on the other hand, is an external benchmark directly linked to RBI's repo rate.
Bank of Baroda
Bank of Baroda has raised its marginal cost of funds-based lending rates (MCLR) by 5 per cent across all tenures. The new rates will be effective from February 12, 2023.
The overnight MCLR rate was increased to 7.90 per cent from 7.85 per cent earlier. It is currently 8.20 per cent for the one-month MCLR, 8.30 per cent for the three-month MCLR, and 8.40 per cent for the six-month MCLR. The bank's new rate is raised to 8.55 per cent for one-year maturity.
Union Bank of India
Union Bank of India has also raised MCLRs across all tenures, effective between February 11, 2023, and March 10, 2023.
Accordingly, the Union Bank of India's overnight MCLR rate has increased to 7.90 per cent, while its one-month, three-month, and six-month rates have increased to 8.05 percent, 8.25 percent, and 8.45 percent, respectively. Three-year MCLR is 9 per cent, two-year MCLR is 8.85 per cent, and one-year MCLR is 8.65 per cent.
Once repo rates are reduced, it is not guaranteed that banks will reduce the MCLR, as is the case with the RRLR. MCLRs are usually revised half-yearly or annually.
The public sector lenders Punjab National Bank (PNB) and Bank of Baroda (BoB) have increased their repo-linked lending rates by up to 25 basis points.
Canara Bank
Canara bank informed, “Rates of interest of all retail lending schemes are linked to repo linked lending rate of the bank – 9.40 per cent with effect from February 9, 2023.”
Low-risk borrowers can benefit from a 0.25 per cent concession to the RLLR rate on housing loans sanctioned and disbursed by Canara Bank from January 1, 2023, to March 31, 2023. However, a credit risk premium may be added over RLLR.
Punjab National Bank
Punjab National Bank announced an increase in the RLLR to 9 per cent from 8.75 per cent with effect from February 9, 2023
"The RLLR has been changed from 8.75 per cent to 9.00 per cent {Repo Rate (6.50 per cent) + Mark-up (2.50 per cent) w.e.f. February 9, 2023, for all customers. Along with RLLR, BSP of 25 bps will be charged," Punjab National Bank informed.
