Axis Bank on Monday raised its marginal cost of funds-based lending rate (MCLR) by 10 basis points (bps) for some tenures. The one-year MCLR at Axis Bank now stands at 8.4%, up from 8.3% earlier. This is the second time the bank has raised lending rates in as many months. On January 18, it had raised the one-year MCLR by 5 bps to 8.3%, becoming the first large lender to raise its MCLRs ever since the pricing mechanism came into effect on April 1, 2016. At Axis Bank, the three-month, six-month, two-year and three-year MCLRs are now 8.15%, 8.3%, 8.45% and 8.5%, respectively. MCLRs of tenures under three months were left untouched. Earlier this month, HDFC Bank raised its one-year MCLR by 10 bps to 8.2%. The corresponding rate is 7.95% at State Bank of India (SBI) and 8.2% at ICICI Bank.
With yields in the bond market rising nearly 100 bps over the last few months, banks have found it more expensive to issue certificates of deposit (CDs). At the same time, the higher cost of borrowing from the markets may have nudged some corporates to return to banks, allowing the latter some headroom to raise rates. Banks began by raising their bulk deposit rates, with SBI making the first move in November 2017. Between November 29 and January 30, the rate on one-year deposits of over Rs 1 crore at SBI has jumped by 200 bps to 6.25%. However, most banks have left their retail deposit rates unchanged, so far, and state-owned banks have also not raised MCLRs. “We have aligned bulk deposit rates with retail deposit rates and the hike will not impact the cost of funds in a significant manner,” PK Gupta, managing director, SBI, told a television channel last month.
