Bank of Baroda (BoB) on Wednesday followed larger rivals State Bank of India (SBI) and ICICI Bank in hiking lending rates. The state-owned lender raised its marginal cost of funds-based lending rate (MCLR) by five basis points (bps) across tenures.
BoB’s one-year MCLR now stands at 8.55%. MCLRs for other tenures range between 8.05% and 8.4%. The revised rates come into effect on Friday.
Earlier this week, SBI, the country’s largest lender by assets, had raised its one-year MCLR by 20 bps for the month of September. The one-year MCLR at SBI now stands at 8.45%. ICICI Bank raised the corresponding rate by 15 bps to 8.55%.
Experts say the aggressive rate hikes by banks indicate the impact of a rise in their cost of funds as well as the continuing impact of bad loans sitting in banks’ books. Earlier, rate increases by banks had been gradual and that might be changing now.
The lending rate hikes correspond with the yield on the benchmark 10-year government bond breaching the 8% mark. Banks may also be expecting another hike in the repo rate in 2018 and are, therefore, passing on the earlier hikes to their borrowers.