Despite RBI status quo on interest rates, Bank of Baroda hikes MCLR; loan EMIs to increase
Bank of Baroda (BoB) has hiked its benchmark lending rates by 5 basis points (bps) on various tenures. The new rates will come into effect from August 12th. The hike in the MCLR by the Bank of Baroda comes just a day after the RBI announced a status quo on the repo rate.
With the latest hike, EMIs on term loans linked to the respective benchmark rates will likely go up as well. The rise in MCLR will impact corporate borrowers. Retail lending, which includes housing, personal credit, and SMEs, is predominantly linked to external benchmarks such as policy repo rates.
With effect from August 12, the bank's Marginal Cost of Funds Based Lending Rate (MCLR) for overnight will be 7.95%. .BoB imposes 8.20%, 8.30%, and 8.40% MCLR on one-month, three-month, and six-month respectively. The bank's 1-year MCLR will be 8.65% effective tomorrow (12 August) Overnight MCLR 7.95 1 Month MCLR 8.20 3 Month MCLR 8.30 6 Month MCLR 8.40 1 Year MCLR 8.65 In general terms, MCLR is the minimum interest rate that banks require to charge for a specific loan.
If the interest rate on the loan rises, EMIs will also increase unless the bank reduces its mark-ups/margins on loans. As a result, borrowers will now have to shell out more to pay their EMIs for loans that are linked to MCLR. For existing borrowers with their loans linked to MCLR, the hike will impact their EMIs when their loan reset date arrives.
HDFC Bank too hiked benchmark MCLR by 15 basis points (bps) on select tenures with effect from 7 August. ICICI Bank, Punjab National Bank, and Bank of India have revised their marginal cost-based lending rate (MCLR) on loans effective 1 August 2023. In line with expectations, the Reserve Bank of India (RBI) decided to keep interest rates unchanged
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