Public sector lender Bank of Baroda on Wednesday increased its marginal cost of funds-based lending rate (MCLR) by 5-20 basis points (bps), effective August 12. The bank has hiked its one-year MCLR by 5 bps to 7.70%. This is the fifth consecutive MCLR increase by the bank.
With this, the bank’s overnight MCLR stands at 6.85%, one-month at 7.40%, three-month at 7.45% and six-month at 7.65%, according to an exchange filing.
The increase in policy rates by the Reserve Bank of India (RBI) has prompted the banks to raise their lending rates. ICICI Bank, Punjab National Bank, Yes Bank and Bank of India raised their MCLR by 10-15 bps even before the RBI policy decision became public, while August 8 onwards HDFC Bank and IDFC First Bank raised their MCLRs by 5 bps and 20 bps, respectively.
Banks are increasing their cost-based lending rates and deposit rates following the policy rate hike, which adds up to their costs. Since April, the RBI has increased the policy repo rate by 140 bps.
Besides, banks are also their external benchmark based lending rates (EBLRs), most of which are linked to the repo rate. Lenders typically revise MCLR every month while EBLR is changed after the RBI policy decision. RBI on Friday raised the repo rate by 50 basis points after which Bank of Baroda, Punjab National Bank, Union Bank of India, Canara Bank and ICICI Bank raised their repo linked loan rate (RLLR). The new rates stand in the range of 7.70-9.10%.
Non-banks such as Housing Development Finance Corporation (HDFC) and LIC Housing Finance have also increased their retail prime lending rate (RPLR) on home loans. HDFC has raised its RPLRs twice so far this month.