Bank of Baroda on Thursday raised the marginal cost of funds-based lending rates (MCLR) by 10 basis points (bps). The one-year MCLR offered by the lender now stands at 8.05%, according a regulatory filing. The lending rates for shorter tenures are in the range of 7.25-7.90%.
The bank has raised its MCLR by 65 bps since June after the Reserve Bank of India (RBI) initiated the rising interest rate cycle. Within overall advances of the bank, around 53% are linked to MCLR, 28% to repo rate-linked lending rate and 7% are fixed-rate loans. The corporate loan book of the bank, which makes up for 50% of the total portfolio, is linked to the MCLR.
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Earlier this month, ICICI Bank raised MCLR by 20 bps to 8.30%. Lenders are increasing lending rates at a faster rate compared to deposit rates, creating a lag in the transmission of policy rates for loans and deposits.
While there has been an increase in deposit rates for Bank of Baroda, the lender needs to be judicious with the rate increases depending on the demand for deposits. Otherwise it will increase costs of the bank, Sanjiv Chadha, MD & CEO, had said earlier.
The overall credit growth in the banking sector has outpaced that of deposits. The industry credit grew by close to 18% as of fortnight ended October 21, according to RBI data. On the other hand, deposits grew by around 10% during the same period.